Detroit isn’t the only old industrial city attracting rental landlords at a record clip. Last year, investors accounted for 75 percent of sales in Flint, Michigan, 68 percent in Gary, Indiana, and 51 percent in Memphis, Tennessee. Other cities with comparable rates are vacation communities such as Myrtle Beach, South Carolina (69 percent) and Honolulu (54 percent).
With investors dominating these housing markets, it’s no wonder that renters now make up the majority of households in most big U.S. cities.
Whether that’s a good thing is less clear. Rental investors deserve credit for stabilizing many local housing markets after the foreclosure crisis, said Nela Richardson, chief economist at brokerage Redfin. And the Rust Belt cities where investors are playing an outsized role are still in varying states of chaos: In Detroit, it’s possible to find a portfolio of 12 homes selling for less than $550,000.
But U.S. home ownership is hovering around a 50-year low, and investors are competing for homes at a time when there aren’t enough for-sale listings to satisfy demand. “We’ve come to a point where inventory shortages have become a part of the fabric of American housing market,” said Richardson. “It’s fair to ask: Have investors worn out their welcome?”
In the aftermath of the foreclosure crisis, such institutional investors as Blackstone Group LP and American Homes 4 Rent amassed big portfolios at distressed prices, gaining economies of scale on financing, renovating and managing the rental homes. The largest single-family investors slowed their pace of acquisitions years ago, but plenty of smaller firms are picking up the slack: Nationally, investors accounted for 33 percent of purchases in 2016, the highest share since at least 2000, the earliest year for which Attom provided data.