The latest report, just published today by the Shenehon Center for Real Estate is not a significant shocker. Current trends of single family housing supply shortages continue. Herb Tousley, Director of the University of St. Thomas’ Shenehon Center for Real Estate, gave interesting insights this month. Many people have attributed the shortages to simple reasons such as increased demand due to millennials and generation X’ers beginning to settle down which are true, but Mr. Tousley brings up a seemingly looked over the recent actions of investment vehicles.
“Nationally, over the past five years, the single family rental home has become its own institutional asset class with over $50B invested by the large players (amounting to over 250,000 homes). Companies that scooped up foreclosures and rented them out during and after the recession are staying in the rental game. Despite rising prices, institutional investors continue to buy single-family rentals.”
The report alludes to investors looking for safety and longevity. This sentiment is echoed by a recent opinion column in the Financial Times by John Authers – “US stocks are overvalued” – and by local Steve Hovland, director of research for HomeUnion, a real estate investment management firm who said, “Investors are willing to accept much smaller returns… a volatile stock market has made investors wary.” Unlike a “typical” buyer, many of these investors acquired homes in the downturn, but they are not selling despite current market prices. Institutional investors are looking for long-term returns, and with a significant amount of homes in their portfolios, the market is not seeing, as in the past, homes acquired in down-markets re-entering the market for sale. Some main takeaways from the report:
- Institutional Investment is contributing to shortages
- Institutional Investors bought 2.9% of homes last year
- Median Sale Prices slightly down from last month, but still up 5% from last year
- Home supply compared to Oct. 2016 is down 17.7%
- Index and market slightly down due to seasonal trends
For more information or the whole report: Shenehon Center for Real Estate
The University of St Thomas Residential Real Estate Index has been developed by the Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business to correct the overstatement of housing price decline reported by the S&P Case-Shiller Price Index for the Minneapolis–St. Paul metropolitan area. Rather than a single index or price representative of all homes, the UST Residential Real Estate Index includes the price of homes in three sub-markets: traditional sales, short sales and foreclosure sales as well as a nine variable composite index for measuring market health for each category based on a three-month moving average.