Publications

- April 1, 2013: Vol. 25, Number 4

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Welcome to the neighborhood: Investors are diving into the single-family housing market, but it’s unclear whether it can become a sustainable institutional asset class

by Tyson Freeman

Exactly how — or even if — the single-family housing market will develop into a longer-term institutional investment asset class is still not clear. But you cannot tell by the current transaction volumes and business building activity in the sector.

The single-family rental market is not new. It is large and has been there for decades. But institutional participation in it is new. Deeply discounted homes and a shift to renting have created the right conditions to draw some well-known institutional investors into the fragmented, operationally intensive business. The path to ongoing institutional involvement is familiar: risk-tolerant investors accumulate and stabilize discounted assets and either securitize or sell them into securitized investment vehicles. With the portfolio “de-risked,” more risk-averse, yield-hungry investors enter the market. So far, the market has marched confidently toward that end.

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