Instead of a substantial institutional selloff, we're witnessing a deliberate culling of home portfolios

The pandemic economy was simply too good of a deal for institutional homebuyers to pass up on: Soaring rents, ultra-low interest rates, easy access to capital, and soaring home prices. According to John Burns Research & Consulting, institutional landlords (firms owning at least 1,000 homes) comprised 2.4% of home purchase in Q2 2022 (equivalent to 1 in every 42 home purchases). That frenzy fizzled out once interest rates spiked last summer. In Q2 2023, institutional landlords accounted for only 0.4% of home purchases (or just 1 in 250 purchases).

But this institutional slowdown isn't translating into a massive institutional selloff, or as ResiClub put it bluntly a few weeks ago: "There's no national flood of institutional homes hitting the housing market."

Instead of a substantial national institutional selloff, we're witnessing a deliberate culling of portfolios, as some institutional landlords transition into net selling by divesting underperforming homes or withdrawing from certain neighborhoods.

To better understand which institutional homebuyers are selling off the most—and least homes—ResiClub reached out to the residential real estate data pros at Parcl Labs.

Parcl Labs provided ResiClub the following data 👇

The Parcl Labs data makes it clear that institutional homebuyers aren’t offloading a ton of inventory. Invitation Homes, which owned just over 84,000 homes at the end Q3 2023, only has 78 homes up for sale. Amherst, which owns around 44,000 homes, has 94 homes for sale. That’s just normal portfolio culling.

The exceptions are VineBrook (2.9% of its portfolio is for sale), Sylvan (2.4% of its portfolio is for sale) SFR3 (2.1% of its portfolio is for sale), and Divvy (1.9% of its portfolio is for sale), according to Parcl Labs.

In other words: Among these 21 major institutional homebuyers, only 3 are selling off at least 2% of their portfolio right now.

Divvy being high on the list makes sense, given its business model: They rent homes to financially constrained individuals until they're prepared to make a purchase. That rent-to-own business model, in theory, has higher levels of turnover.

VineBrook—as ResiClub told readers last week—is a bit of a different story: VineBrook Homes Trust doesn’t have enough liquid capital ready to meet its debt requirements. In its third quarter filing, it wrote: “The Company has significant debt obligations coming due on the Warehouse Facility of approximately $1.2 billion within 12 months of the financial statement issuance date. As of the date of issuance, the company does not have sufficient liquidity to satisfy these obligations. In order to satisfy obligations as they mature, management intends to evaluate its options and may seek to… sell homes from its portfolio and pay down debt balances with the net sale proceeds.”

“VineBrook is a prime example of a borrower/fund becoming over-extended due to rates going up,” Noel Christopher, one of the nation's leading thought leaders in both the single-family rental space (SFR) and the build-to-rent space (BTR), told ResiClub last week. “Fortunately, it's a good time to sell. They will get top dollar for most of these homes even if they sell at a 10% discount. They will likely at least hit their cost basis or more when selling. They are not selling in bulk; no reason to. Selling the homes one by one is the best way to maximize value.”

Next week, ResiClub will use analysis provided by Parcl Labs to show which institutional firms are buying the most homes right now. So the inverse of today’s piece.

Over the weekend, ResiClub PRO members (premium) got access to the updated Lance Lambert Inventory Tracker.

Below is one of the three interactive maps included in the ResiClub PRO piece that went out on Saturday. If you have any questions about ResiClub PRO, email me at [email protected]

Click the image to be taken to the interactive map 👇