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Fortune Article on Wall Street Home Buying: https://fortune.com/2023/05/05/institutional-homebuyers-pullback-from-the-housing-market-invitation-homes/
The decline in Wall Street buying will hit housing markets like Jacksonville, Atlanta, Phoenix, and Miami hardest, which are the cities where investors bought the most homes in 2022 according to data from Redfin.
Big corporate landlords are purchasing fewer homes for three main reasons:
1) Increasing Evictions / Higher Vacancy Rates
2) Lower Rent Growth
3) Higher Interest Rates
Higher interest rates have resulted in the cost of capital for Wall Street Buyers like Blackrock surging north of 6%. While the Cap Rate, or investor profit from a rental, is only 4.6% on average. Meaning that big investors are losing money of their investment properties after they pay their lender (which is typically a bank).
But despite this drop in Wall Street buying, it is still difficult for a regular homebuyer in purchase a house. And that’s because stubborn sellers in the US Housing Market are refusing to list their houses, or when they do list, pricing way too high. Such is the case south of Nashville where sellers are listing 20% above Zillow’s market value estimate despite a huge surge in inventory in the area.
Another reason Wall Street Buyers are abandoning the Housing Market is the declining rental market. Asking rents have declined YoY in 40 of the largest 100 cities in America according to data from Apartmentlist. Meanwhile, vacancy rates are surging due to a big increase in evictions.
Cities such as Las Vegas, Phoenix, and Los Angeles have some of the most empty apartments as a result of these evictions.
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