Private equity has noticed the boom in the cost of housing — both owning and renting — and wants to cash in.
Blackstone, the brainchild investment firm of Stephan A. Schwarzman, has scooped up a company called Home Partners of America that has built a business specializing in real estate. Home Partners, which owns more 17,000 houses in the U.S., specializes in renting single family homes, and offering renters a chance to buy the properties, at times. As the Wall Street Journal reports, Blackstone isn't alone in spotting a profit opportunity in the hot housing market. Brookfield Asset Management and J.P. Morgan have also made inroads into the rental-operator niche of the market.
That said, big investment firms own a tiny percent of the single-family housing market — just 2% according to a recent report, also cited by the Journal. Yet it's impossibly not to look at this acquisition as a sign that big firms see a further boom in housing prices coming — and not a bust or decline. Of course, when financial firms are wrong about something, they are often wrong in spectacular fashion. Witness the subprime mortgage crisis, which led to a global financial crisis over a decade ago.
This time around, rather than extend credit to would-be homeowners of questionable means, investors are taking a more cautious route, using their capital to own the property outright, collect rent, and benefit from any increases in the value of the underlying asset (the home) and rental market, at the same time.
Check out this map of Home Partners homes, if you're wondering where they have been snapping up properties. Although they are in some of the more expensive housing markets in the country, they appear to focus on suburban areas. This is likely a strategic choice to avoid major city centers already dominated by a renting class living alongside the those who can afford to buy, whether through wealth, or through having bought property decades ago, in a much different economy and market.
It will be interesting to see how Home Partners expands now that they have Blackstone's $119 billion market cap behind it, and whether other financial firms follow suit in making similar investments into the housing market.
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