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The Future of the Housing Market

Posted by Sami Thalji | Sep 14, 2021 | 0 Comments

Here is an outline of some major problems in the housing market. Specifically, investment firms like Invitation Homes are targeting homes for purchase that make up the foundation of wealth building for working class Americans and 1st time home buyers. 

  1. Investment Firms. The business model will cause a long-term shift in housing fundamentals.
    1. Invitation Homes is a $21b publicly traded company spun off from Blackstone in 2017;
    2. Average person borrows at 2-4% interest;
    3. Invitation Homes is borrowing a billion dollars at a time to buy homes and getting interest rates under 1.5%;
    4. In practice that means that Invitation Homes can afford to pay an extra $5,000 - $20,000 per home and still have the same exact costs as a typical homebuyer;
    5. Even though Invitation actually uses a combination of borrowed funds and revenue from rentals to purchase properties, they usually write their offers a cash which is another major advantage;
    6. People say “but they're really not buying that many homes…in Atlanta, one of the their biggest markets they've only purchased 13,000 homes this year in a market that sells 800,000 homes a year;
    7. Look at the types of homes they're buying
      1. Invitation has a $16b portfolio;
      2. They collect about $2b/rent;
  • Price to rent ration of about 8;
  1. Rule of thumb for evaluating fair sales price for price-to-rent ration? 20;
  2. High ratios means rent;
  3. Low rations means buy;
  • Invitation is getting deals 2-3x better than regular homeowners;
  • This shows Invitation is not just buying homes, they are buying specific homes that offer highest potential for wealth building for average consumer;
  1. They are not buying every home, they are buying the homes that might otherwise be obtainable by younger, working-class households in cities where good paying jobs are relatively easy to find;
  2. They are also buying home using scientific and systematic processes that average homebuyers cannot keep up with;
  3. Because of the markets Invitation operates in they don't have much fear that the extra supply of rentals will drive down rent.

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Sami Thalji




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