Tricon owns 38,000 homes across the United States, the majority of which are in Atlanta. Getty Images—Bloomberg
In 2023, calculating housing was impossible for many people. Low mortgage rates, home prices, and low inventory levels have made buying a home in the United States unattractive and increasingly difficult. It was a far cry from the pandemic housing boom and institutional home buying frenzy. Just 3 years ago. A period of historically low interest rates, easy access to capital, and even rising rents and home prices have all resulted in a frozen housing market for both consumers and institutional investors. But a major multibillion-dollar acquisition announced Friday could signal that the institutional home-buying market is waking up from its slumber.
Private equity giant Blackstone announced Friday that it will acquire Toronto-based landlord Tricon Residential, which owns 38,000 homes across the United States, for $3.5 billion. This compares to a $6 billion deal Blackstone signed with Home Partners of America, which owned more than 26,000 properties, starting in 2021. The deal announced Friday will catapult Blackstone into one of the top spots for institutional homebuyers in the country, behind Progress Residential and Invitation Homes, according to data from real estate data and analytics firm Parkle Labs. .
The majority of Tricon's rental homes are located in Atlanta. Jason Lewisco-founder of Parcl Labs told ResiClub co-founder and former luck real estate editor lance lambert On Friday's X (formerly Twitter) podcast. Tricon has his 7 million units in Atlanta, and other major markets include Charlotte, North Carolina. Tampa, Florida. Dallas, Phoenix, Houston.
History appears to be repeating itself with the Blackstone deal. The company led the home-buying blitz across Wall Street after the 2008 U.S. foreclosure crisis. The company was one of the first major investment firms to buy homes in bulk in the aftermath of the subprime mortgage crisis. Tricon stock rose more than 28% to $11.07 at the close of trading Friday after Blackstone agreed to pay Tricon $11.25 per share in cash.
Recent history of institutional home purchases
The institutional home buying market was heating up even before 2023. When mortgage rates and home prices were low, investors bought up rental properties at lower purchase prices.
“The institutional side of the market has experienced a huge boom during the pandemic,” Lambert said on the podcast. “There was a frenzy: interest rates were low, house prices were in tatters, rents were in tatters. [there was] Easy access to capital. It was the perfect storm for capital to flow into the single-family housing market. ”
As a result, institutional homebuyers like Tricon are buying in major markets such as Charlotte, Tampa, Dallas, Phoenix and Houston, he explained. However, when mortgage rates hit 8% in October 2023, the investment became less profitable.
“As interest rates skyrocketed, the math became less attractive for institutional investors,” Lambert said. “Institutional buying has slowed considerably, with a significant number of institutional investors selling more than they are acquiring.”
Lewis predicts that 2024 will see further consolidation of home buying by institutional investors.
“There's a lot of variation in how these portfolios are managed, and that has to do with the level of sophistication in the use of data and analytics,” Lewis told Lambert. “That was fine when the housing market was red-hot. And this is becoming more of a pressure on portfolios that don't really have sophisticated or mature operating efficiencies. So things like this I think we'll see other forms of consolidation in transactions throughout 2024.”