It’s news to few that buying a single-family home in the U.S. is the most difficult it’s been in recent memory. A mix of factors are fueling a red-hot housing market, including the COVID-19 pandemic prompting many people to move out of city centers in search of more space, low mortgage rates empowering buyers , and chiefly, home builders not keeping up with long-term demand growth leading to a significant shortage in supply, as the Wall Street Journal reports. While most recognize these factors as the primary drivers of a housing market that’s become challenging for first-time buyers, another narrative has emerged that erroneously seeks to place blame on one small sector of the housing market.
Several headlines contribute the current housing shortage and rising prices to investors or companies like Invitation Homes “crowding” the market for single-family home buyers. The truth is institutional ownership remains a very small part of the overall home rental market and an even smaller slice of the overall housing market . Invitation Homes is a tiny sliver of both. There are more than 90 million single-family homes in the U.S. Of these, 16.5 million are single-family rentals.[1] The vast majority of single-family rentals (16.2 million) are operated by mom-and-pop landlords, leaving the remaining 300,000 under operation by institutional owners.[2] Of this 300,000, Invitation Homes owns and operates roughly 81,000 homes. To put that in perspective, we represent less than 0.5 percent of the total single-family rental market, and less than 0.1 percent of single-family homes in the entire country.
Others have questioned whether large owners of single-family rental homes are driving up housing costs for everyone. The National Rental Home Council (NRHC) has found that the data just doesn’t support the claim that large rental home companies account for out-sized home buying activity. According to the NRHC, large rental home companies accounted for less than 0.15 percent of all homes purchased in the U.S. in 2020, a year when home sales reached a 14-year high. The number of homes purchased by Invitation Homes last year was less than 0.05 percent of all homes that changed hands . Moreover, because many of the homes we purchase require significant upfront renovations, this is not the same market as first-time home buyers, who typically do not want to take on a home that requires significant immediate investments. These facts confound perceptions about the industry.
While home prices have increased in many of our 16 markets, they are also up nationwide and in hundreds of markets where Invitation Homes does not have a presence. This serves as further evidence that skyrocketing demand and pricing is hardly isolated to communities where institutional investors have a bigger footprint. A recent report by the National Association of Realtors (NAR) found that nearly every metro area tracked — 99 percent — recorded year-over-year price increases in the first quarter of 2021. Invitation Homes has no presence in the 11 metro areas with the highest price increases, and NAR reports that the overwhelming majority of metros experienced strong price increases, with 89 percent registering double-digit price growth. As NAR Chief Economist Lawrence Yun said , “significant price increases throughout the country simply illustrate strong demand and record-low housing supply.”
Not discussed often enough is the positive impact single-family rental companies can have in a community. Invitation Homes is proud to be a long-term investor in each of the markets where we operate. In 2020, we invested more than $397 million improving our homes to meet the desires of our current and prospective residents, and we invested an average of $39,000 refreshing the new homes we purchased before a resident ever moved in. Over time, we have invested more than $2.4 billion in upfront renovations of our properties. It’s no surprise that studies have found single-family rental homes contribute to the livability of communities.
An additional positive impact is our affordability compared with other housing options. Our average monthly rent across our portfolio was approximately $1 per square foot for the first quarter of 2021, which was significantly less than our multifamily REIT peers. Excluded from our price per square foot are the added benefits of a private garage along with a front and back yard.
The bottom line is that Invitation Homes provides choice and flexibility to the growing segment of Americans – across all generations – who are opting to rent instead of own, and we will continue to enhance the services we provide in order to ensure an exceptional leasing experience for them.
[1] John Burns Real Estate Consulting; data as of April 2021.
[2] John Burns Real Estate Consulting; data as of April 2021. Public company home counts from public filings as of 1Q21; Private company home counts estimated using HouseCanary data as of December 2020.