Investor purchases of single-family homes contribute to rising rental listings in Spring

In ZIP code 77373, 479 homes are owned by these five major institutional investors—the most of any area ZIP code. Meanwhile, data shows FirstKey Homes has the strongest foothold with 339 homes owned across the area’s nine ZIP codes.

Additionally, while a majority of households in the Spring area were owner occupied in 2020, ZIP codes 77070 and 77090 had a majority of renter-occupied housing units, according to American Community Survey five-year estimates.

Evangelou said the trend causes first-time, low-income buyers to face steeper competition for home purchases as firms tend to target the same properties they would buy.

“If you’re [selling] at an entry-level price point, you’re going to get 20-30 offers, and cash is king because they don’t require an appraisal; they’re waiving inspections; and it’s an easier close. So that’s when investors can just steamroll over a newly married couple,” said Jenny Hill, a real estate agent with Coldwell Banker Realty.

Build to rent

Firms have also been developing entire build-to-rent communities. Howard said two years ago, 3% of NRHC companies were building homes for rent, compared to 26% in 2022.

“People are familiar with the fact that there’s a supply crisis when it comes to purchasing a home. But I think people are less familiar with the fact that there’s just as severe a supply crisis in the rental housing market,” Howard said.

HAR data showed new single-family rental listings increased 28.6% from May 2021 to May 2022.

A 2022 study conducted by researchers at the University of California at Berkeley found American Homes 4 Rent and the Canada-based Tricon Residential had invested millions of dollars as of the fourth quarter of 2021 in developing homes for rent.

Locally, CDC Houston began site preparation for Phase 1 of City Place’s new 400-acre residential project with DMB Development in May, which officials said will include single-family rental options. “Given the high demand for rental in the Houston region, we decided to integrate single-family rental into the first phase of our residential project,” CDC Houston Project Manager Andrew Giammalva said. “We want to give [transient] employees an opportunity to live in a home without having to purchase a home.”

Just north of Spring in Tomball, Tricon Residential and HHS Residential broke ground in December on Willow Creek Manors—a new single-family rental home community slated to open 14 units on FM 2920 later this year.

Invitation Homes and American Homes 4 Rent did not respond to a request for comment, and FirstKey Homes referred Community Impact Newspaper to the NRHC for comment.

Long-term impacts

Institutional buying trends emerged as the housing industry is facing record lows in inventory. In May, the HAR reported the Houston-area market had 1.6 months of supply—the highest mark since October 2021 yet below the six-month mark the NAR considers a “balanced” market.

Jennifer Wauhob, chair of the board for the HAR, said in a June 15 news release that conditions “appeared to be calming.”

“New listings increased 9% in May, helping boost inventory to its highest level of the year, so hopefully we can begin to see signs of normalcy in terms of supply, demand and pricing in the months ahead,” Wauhob said.

Charlie Kriegel, who partners with firms for the Houston-based Winhill Advisors-Kirby, said although investment firms were pivoting toward build-to-rent communities, institutional home purchases would “never go away.” NAR data showed from 2015-20, national market shares dropped from 15.4% to 11.8% before rising to 13.1% in 2021.

“Build-to-rent is the fastest-growing segment of real estate in America—it’s not going anywhere,” he said.

Kriegel said national trends could see at least 40% of single-family homes owned by firms, which would change the homebuying dynamic.

“There’s no negotiating with an institutional buyer,” he said. “Anyone who’s buying for under $400,000 will need to understand that.”