With the housing market continuing its rebound, the asset management firm Blackstone Group (BX) has been beefing up its purchased of single family residential properties. Last year the company spent upwards of $2.5 billion on homes to manage as rentals.
The recent financial collapse led to a wave of foreclosures, which combined with tighter lending standards could see single family home rental properties turned into a new asset class. Blackstone is the nation’s largest investor in homes to rent, and with prices starting to rise, it is trying to gobble up as many homes as possible.
The company’s buying spree began last year, and it has acquired so many homes through auctions and short sales that it is now having a hard time keeping up with its massive inventory. It is focusing on areas where housing prices were hit the hardest during the recession, such as Chicago, Las Vegas and Southern California.
Currently the company has so many houses that around half of them are being “warehoused” until the company can marshal the manpower to fix them up and rent them out.
The “American Dream” long been built on the idea of owning your own home, but that has not been the case in recent years. Homebuyers are still a bit weary of the dramatic price drops we have seen in recent years, and those that are willing to jump into the market are finding it difficult to secure financing.
That leaves room for asset managers like Blackstone and others to buy up single family homes at low prices and then rent them out. Renting out single-family homes has traditionally been dominated by mom-and-pop investors and small local firms. Massive investments by Blackstone could be the beginning of the emergence of single-family rental properties as an asset class, JP Morgan (JPM) estimates this market could be worth up to $1.5 trillion. What Blackstone plans to do with these houses is unclear, but it's not outside the realm of possibility that would see a new kind of REIT or other vehicle that focuses on single-family rental properties.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va. His articles typically cover big-picture events and forecasting what impact they will have on the stock market. In addition to writing for Fresh Brewed Media, Michael also wrote for AOL's BloggingStocks for three years, focusing most of his attention on the energy and technology sectors. Follow him on Twitter at @MFatMICenter.