The nation’s second-biggest homebuilder is marketing thousands of homes at a time when investors are looking for deals on rental properties, according to a new report.

New markets require new approaches and tactics. Experts and industry leaders take the stage at Inman Connect New York in January to help navigate the market shift — and prepare for the next one. Meet the moment and join us. Register here

One of the nation’s largest homebuilders is working to sell thousands of homes worth billions of dollars to investors, according to a new report.

Lennar Corp. has been marketing thousands of its new homes to investors at a time when sales to traditional homeowners have slowed and the rental market remains strong, Bloomberg reported on Friday, citing unnamed people familiar with the matter.

Lennar’s marketing of thousands of homes that would likely remain rentals comes at a time when major investors are looking to capitalize on the slower housing market by sourcing deals from homebuilders to build up their portfolios.

“Homebuilders nationwide found themselves with a sudden surge of unsold inventory when mortgage rates rose suddenly, triggering cancellations as buyers could no longer afford the monthly payment,” said Brad Hunter, president of Hunter Housing Economics

A representative from Lennar didn’t immediately respond to a request from Inman for comment on Monday. The company told Bloomberg the offering is part of its standard marketing efforts.

Builders are selling individual, scattered units and entire subdivisions and “horizontal multi-family” developments of rental homes.

Hunter expects that in the next two years, homebuilders will ramp up production of single-family rental homes to 150,000 per year and that supply still won’t meet the demand for rental housing. 

The portion of single-family homes being built to rent and sold to investors represents about 12 percent of all single-family housing starts today, according to Robert Dietz, chief economist for the National Association of Home Builders. The historical average is about 3 percent, he said.

“Going from 3 percent to about 12 percent is a pretty big gain,” Dietz said. “I think that’s a reflection of the fact that housing conditions on the for-sale side of the market have declined so much.”

Investor activity has slowed slightly from 2021 but remains above historical averages, according to new data from CoreLogic. In the third quarter of 2022, investor purchases were 20 percent higher than at the same time in 2019 and 2020. The share of sales of owner-occupied properties is 30 percent less now than it was before the pandemic, according to CoreLogic.

That’s after high prices and the rapid run-up in mortgage rates put upward pressure on the rental industry, and investors are looking to build their portfolio of rentals. 

Lennar is offering about 5,000 homes, largely in the South and Southeast. These are areas that have been attracting what CoreLogic calls “mega investors,” or those who own more than 1,000 homes. The firm found that mega investors were most active in markets with high price appreciation, which over the past two years has included markets across the Sun Belt.

Major investors had the ability to outcompete individual buyers when the real estate market was highly competitive due to the structure of their financing, CoreLogic found. Now that things have slowed significantly, investors will likely look for discounts.

“Although the investor-operations see this opportunity, they are also looking to buy at a discount,” Hunter said. “This discount can be magnified when the homes that were built are not the ideal size or configuration for rentals.”

In the third quarter, the average price of a Lennar home was $491,000, up from $428,000 the year before.

Email Taylor Anderson

Get Inman’s Property Portfolio Newsletter delivered right to your inbox. A weekly roundup of news that real estate investors need to stay on top, delivered every Tuesday. Click here to subscribe.

CoreLogic | rentals | websites
Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×