For well over a year now, I have been writing about how this whole “buy to rent” investment strategy is one of the biggest disasters waiting to happen within the U.S. economy. I have repeatedly noted that these private equity clowns were crowding into these markets with reckless abandon and that this would ultimately crush their business model as there’s no way rents can rise enough to keep yields attractive in a country where most people are struggling to meet their daily expenses. Well it seems the day of reckoning may be at hand. From Bloomberg:
Rents for single-family homes are rising slower than property prices as firms such as Blackstone Group LP (BX) flood the market with homes for lease, posing risks to investors betting billions on the burgeoning market.
Monthly payments for properties in Phoenix rose 1.3 percent in February from a year earlier, compared with a 25 percent jump in for-sale asking prices, according to Trulia Inc. (TRLA), which operates an online listing service. In Atlanta, asking prices climbed 14 percent as single family rents gained 0.5 percent, and in Las Vegas rents dropped 1.7 percent even as asking prices soared 18 percent.
Seems like a fantastic business model…
“Investors are buying homes, in part, to rent them out, and that has added a lot of rental supply, and that’s preventing rents from rising,” Jed Kolko, San Francisco-based Trulia’s chief economist, said in a telephone interview. “It means some investors will start to think about selling those single-family rentals.”
“They’re effectively pushing prices up on each other,” Chang, a former Morgan Stanley housing analyst, said in a telephone interview.
Tina Africk, a Las Vegas broker who manages 60 single- family home rentals, said houses that might have rented in 30 days in the past can now take 60 to 90 days to fill, while rents have dropped about $100 a month from a year ago.