In their hunt for rental properties, institutional investors have been pushing up house prices and crowding out homebuyers. But their impact on the market might diminish later this year, according to economists at Wells Fargo Securities.
As institutional buying declines, the pace of home price appreciation will slow, the new
The economists expect rising interest rates will reduce the “risk-adjusted returns” on converting single-family homes to rentals. “We doubt that institutional buyers will continue to raise as much capital as they have in the past, and their influence on the overall housing market should wane later this year,” the April 16 report says.
The WFS “Housing Chartbook” also points out that this housing recovery has been far from normal—inventories are low, credit is tight and builders are frustrated by shortages of lots and labor.
“We are unlikely to see a smooth transition to a normal or new normal housing market. Too much of the financial infrastructure related to housing finance and new home construction remains impaired or clouded to allow sales or new construction to get ahead of themselves,” according to WFS.
