The American Homes 4 Rent-Beazer deal continued a trend that has seen REITs and institutional investors buy up single-family rental homes en masse as a way of elbowing into a market traditionally ruled by Mom & Pop operations.
Most of the units being acquired are entry-level homes. Normally, many of them would go to first-time buyers, but they're being "shut out" of the market, says Richard Green, director of the USC Lusk Center for Real Estate.
"Investors can buy with cash, which is ideal for sellers who don't want to wait for loans to be approved," he said.
Some of these investors will look to sell their rental properties as home prices rise and investors can realize sufficient gains on their assets, Green says.
"The private equity guys have been telling investors they will get their money back, so at some point they will have to dispose of the properties," he said. "There's a point where the price will make it appealing to start selling."
However, REITs don't have as much flexibility to sell because "they have a limit on how much property they can dispose of in a given year," Green said.