RENTAL MARKET
2022 REAL ESTATE EDITION
Large investment rms are con- verting single-family homes to rentals and building communities to rent in Cy-Fair to help meet the rising rental demand, while the housing shortage is driving more people to rent in the Houston area, real estate experts said. The Houston Association of Realtors reported June 15 the number of leased single-family home rentals increased 24.8% from May 2021 to May 2022. While rising mortgages and low inven- tory are contributing to the trend, experts said potential homebuyers are also facing competition from real estate investment rms buying properties to sell or lease. “These are not mom and pop buyers. They look to buy properties and communities on a large scale and make pro t from them,” said Nadia Evangelou, the director of forecasting at the National Association of Realtors. Texas leads the nation in institu- tional buying with 28% of single- family homes purchased by institu- tional investors in 2021—more than double the national average of 13%, according to data from the NAR. David Howard—executive director of the National Rental Home Council, a nonpro t that represents the single-family rental home industry— said out of 23 million single-family rental homes in the U.S., 1.3% are owned by large companies. The NAR reported institutional buyers purchased 38% of single-family properties bought in Harris County in 2021. Harris County Appraisal District data showed nearly 850 homes in Cy-Fair are owned by ve institutional buyers and their subsidiaries: Ameri- can Homes 4 Rent, Progress Residen- tial, FirstKey Homes, Invitation Homes and Tricon Residential. “Investors are making more than 25% of home purchases at this point. ... That’s part of what’s created our price surge,” Cy-Fair Realtor Debbie Marshall said. Firms target homes with broad appeal as rental homes, Marshall said. One-story residences with three bed- rooms and two bathrooms are popular among these rms. The trend to rent BY RACHEL CARLTON & JISHNU NAIR Home purchases by investors lead to rising rental listings
NEW NEIGHBORS Harris County Appraisal District data showed institutional investors have made signi cant purchases in Cy-Fair. Investor names were sourced from the Kinder Institute for Urban Research at Rice University.
INSTITUTIONAL INVESTMENT
At least ve major investors in Harris County maintain a presence in Cy-Fair with each owning at least 70 homes as of early June, according to the Harris County Appraisal District. American Homes 4 Rent
SOURCE: HARRIS COUNTY APPRAISAL DISTRICT COMMUNITY IMPACT NEWSPAPER
Homes purchased by top investment rms
American Homes 4 Rent Progress Residential FirstKey Homes
Invitation Homes Tricon Residential
234
Progress Residential
204
FirstKey Homes
99
189
Invitation Homes
115
249
Tricon Residential
74
BIG BUSINESS Texas leads the nation in institutional buying and saw the second-largest percent increase in properties bought by institutional buyers from 2020-21, climbing 4.6%. IN 2021,
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13% of homes purchased in the U.S. were bought by investment rms. 28% of homes purchased in Texas were bought by investment rms. 38% of homes purchased in Harris County were bought by investment rms.
N
13%
WEST RD.
290
28%
529
38%
instead of ip homes is driven by construc- tion costs and the rms’ desire
apartment occupancy rate, but many renters are looking for the single-family experience with bene ts such as yard space. “We are seeing a growing renter- by-choice population,” Carman said. “They’re doing it for a lot of di erent reasons. You know, they may be new to the area and not sure where they want to buy. They may be in a job transition and not quite ready to buy, or they may be retirees that have multiple homes and want to have something near the grandkids.” Evangelou said institutional buyers are contributing to more rentals, providing more options as mortgage rates rise. Marshall said many builders in Cy-Fair are worried about rental prop- erties decreasing the property values in their communities, leading builders to shut out investors. Kriegel said although investment rms are pivoting toward build-to-rent communities, institutional purchases of existing homes will “never go
59,000 houses were built to rent nationwide in 2021, the largest amount since 2003.
$253,645 is the average value of homes owned by institutional investors in Cy-Fair.
to yield more pro t month to month. These rms have also been invest- ing in 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. Rise in communities for rent Charlie Kriegel partners with rms for Winhill Advisors-Kirby and said his clients see build-to-rent as a “wind- fall” for the return on investment. “[Build-to-rent] allows investors to control cost, absorption rate, so it’s going to be the fastest growing segment for the next ve years,” Kriegel said. In the Cy-Fair area, o cials with The Howard Hughes Corp. announced June 22 that Bridgeland’s rst build- to-rent neighborhood of 263 homes is under construction. Jim Carman, Houston region president for Howard Hughes, said Cypress has a high
216 homes are owned by these ve major institutional investors in 77433—the most of any Cy-Fair ZIP code. SOURCES: NATIONAL ASSOCIATION OF REALTORS, HARRIS COUNTY APPRAISAL DISTRICT, KINDER INSTITUTE FOR URBAN RESEARCH AT RICE UNIVERSITY COMMUNITY IMPACT NEWSPAPER away.” National trends could see 40% of single-family homes owned by rms in the next few years, he said. “You’re dealing with corporate America; they’re going to nd ways to be able to develop and build stu ,” he said. “There needs to be some common ground between city o - cials and investors to make sure that what they’re building matches the absorption rate and what the market will demand.” Mikah Boyd and Danica Lloyd contributed to this report.
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CYPRESS EDITION • JULY 2022
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