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bought more than 100 homes and counting. The firm markets and leases
them under a subsidiary called Invitation Homes.
The city has also attracted smaller players, like investment groups affiliated
with Toronto private equity firm Tricon Capital Group, and Connecticut's
Ellington Capital.
Ellington declined to comment, citing a "quiet period" in advance of an
initial public offering for its rental business. American Homes 4 Rent,
Blackstone and Tricon did not respond to requests for comment.
But in a blog post published on the company's website, Blackstone defended
its and other private equity firms' home purchases. The company said it
hasn't been buying enough homes to appreciably change home prices;
instead, the price appreciation is a function of a low inventory and
historically low prices up to now.
Blackstone also said it's been renovating abandoned and foreclosed homes,
improving neighborhoods. And rental homes, Blackstone says, are an
important part of the housing market.
"Renters should have the opportunity to live in a good neighborhood and
send their children to good schools, " the company wrote.
Around the country
Charlotte is not the only market luring these big investors interested in rental
properties. Atlanta, Dallas, Houston, Phoenix and Memphis, Tenn., are
others, real estate experts say.
The investors started buying primarily in recession-rocked markets such as
those in Arizona and California. But they began gravitating to the Southeast
last year, said Sam Khater, an economist for Irvine, Calif.-based housingdata company CoreLogic. In the Southwest, he said, the housing stock is
"fairly young" and, thanks to the dry climate, less likely to be deteriorated
and in need of repairs, making the homes attractive to investors.
"As those markets began to really heat up, they began to rotate out and fan
out to the Southeast, places like Atlanta, Charlotte, Tampa, " he said, adding
that the strong population growth in those areas makes them a draw for
investors.
In the Tampa Bay area, for example, reports of bidding wars have already
become commonplace, said University of Central Florida economist Sean
Snaith. Nearly half of all home purchases are made with cash, a sign that the
Doors Properties, said he has had to change his business model. Two years
ago, he could buy a bank-owned property for about $40,000, invest about
$25,000 in it and flip it to a first-time homebuyer.
"That started drying up in the beginning of last year, " said Tate, who is also
president of the Metrolina Real Estate Investors Association.
Tate blamed large investors for buying up the bank-owned properties. He
hasn't bought one since the spring of last year.
Instead, he buys more expensive sites, paying about $200,000 for them,
knocks down the house that's on the land and builds an $800,000 home on
it. While it's a business model that can be more profitable than flipping
bank-owned properties, the pricier projects come with more risk, he said.
What happens next?
While homeowners are happy to see the values of their homes rise, the
concentration of investor-bought homes is fraught with concerns.
Mekael Teshome, economist for Pittsburgh-based PNC Financial Services
Group, which has bank branches in the Charlotte area, said some observers
are concerned about what happens after the investors' buying frenzy ends.
"The investors are ... driving up prices, " he said. "At some point, that's
going to end."
Another concern some observers have centers on whether another real estate
bubble - inflated, in part, by the investors - is forming, he said.
Vitner, the Wells Fargo economist, said this is the first time institutional
investors have swept the U.S., snatching up single-family homes to rent
them out, in what amounts to an untested business strategy. Typically, the
people who bought rental properties were "mom-and-pop" investors, he
said.
"I'm not quite sure how it's going to work out, " he said.
Vitner said institutional investors have likely exaggerated the extent of the
improvement in Charlotte-area home prices.
"It's priced some traditional buyers out of the market because the investors
typically pay cash and traditional buyers need to get a mortgage and it takes
time to get approval - and, on top of that, the investors sometimes are paying