A bidding war broke out this winter in a new subdivision north of Houston. But the prize this time was the entire subdivision, not just a single suburban home, illustrating the rise of big investors as a powerful new force in the United States real estate market.
DR Horton Inc. built 124 homes in Conroe, Texas, rented them out and placed the entire community, Amber Pines in Fosters Ridge, on the block. A Who’s Who of investors and home rental firms focused on the December sale. The winning $ 32 million bid came from an online real estate investment platform, Fundrise LLC, which manages more than $ 1 billion on behalf of about 150,000 individuals.
The country’s most prolific home builder has set aside almost double what it normally earns from selling homes to the middle class – an encouraging debut in the business of selling entire neighborhoods to investors.
“We certainly don’t expect all of the single-family communities we sell to sell at a 50% gross margin,” said the construction company’s chief financial officer, Bill Wheat, at a recent investor conference.
From individuals with smartphones and a few thousand dollars to pensions and private equity firms with billions, income-seeking investors are snapping up single-family homes to rent or sell. They are competing for homes with ordinary Americans, who are armed with the cheapest mortgage finance ever, and driving home prices up.