Meet one of the nation's epicenters for institutional homeownership: Tampa

Today’s letter is brought to you by DealTracker!

DealTracker is the ultimate real estate solution for finding the best investment properties across the United States. Their AI-powered platform analyzes tens of thousands of homes daily and sends you the best ones, based on your custom filters.

DealTracker helps companies to:

- Spend less money

- Assess the entire market every morning in a matter of minutes

- Protect themselves from human error

Simply login, set your criteria, and watch as DealTracker generates a spreadsheet of curated properties just for you. Sign up for a free trial now and see how dealtracker.ai can improve your business today.

On a national level, institutional homebuyers aren’t massive players yet—they only own around 1% of the U.S. single-family stock, according to Parcl Labs.

That said, in a handful of regional housing markets, institutional homebuyers—those owning at least 1,000 homes—are pretty significant players. In fact, just six markets (Atlanta, Charlotte, Dallas, Houston, Phoenix, and Tampa) are home to 36.8% of all the nation’s institutionally owned single-family homes, according to Parcl Labs.

Tampa, in particular, saw a big rush of institutional homebuying during the Pandemic Housing Boom—a period when low-interest rates, easy access to capital, and soaring home prices/rents made single-family rentals irresistible to investors. The fast-growing Tampa market is one such place they felt was smart to deploy capital.

According to Parcl Labs, around 50% of the single-family homes in Tampa owned by institutions were bought after December 2019.

The interesting part: When institutions pile into a market, they often concentrate in the same neighborhoods. For evidence, look at the map below, which shows the share of single-family homes owned by institutional homebuyers by ZIP code in the Tampa market.

During the Pandemic Housing Boom, a number of institutional operators entered the Tampa market, according to Parcl Labs. That includes Rithm, Roofstock, Nuveen, and Pagaya Technologies. While others already in the market, like Firstkey Homes, put their foot on the pedal.

The institutional frenzy ended not long after mortgage rates began to spike last year. Unlike during the Pandemic Housing Boom, capital markets are now working against mega investors, and fewer homes on the market today pencil the returns institutions need to see to pull the trigger.

To understand just how abrupt the institutional slowdown has been, take a look at Rithm. According to Parcl Labs, Rithm acquired 100% of its Tampa home portfolio in 2021 and 2022, while it added nothing in 2023.

Rithm isn’t the only firm that has completely stopped buying in Tampa—some are even net selling right now.

Jason Lewris, co-founder of Parcl Labs, thinks the new entrants into Tampa are the ones to keep an eye on.

“The cohort to watch is the new entrants. Their economics and market assumptions are fundamentally different than those who have a more mature presence in the Tampa market. Specifically, the newer entrants likely assumed rent growth based on historical trends that has not materialized. The situation now is that they are operating in a highly competitive SFR market, against other sophisticated operators, with compressed yields. What will be their next move?” wrote Lewris in a recent report looking at the Tampa market. “Tampa is on our radar as a market to watch closely. There are actors in the market that are particularly susceptible to rent growth who own a large share of all inventory. They are starting to sell and many others may reach the same conclusion.”

If the spread, representing the difference between the 10-year Treasury yield and the 30-year fixed mortgage rate, were normalized to 175 bps instead of 276 bps, the average 30-year fixed mortgage rate would be 5.75% today instead of 6.76%. This weekend, ResiClub PRO members will receive a deep dive examining when this spread might normalize. It includes commentary from analysts, including Moody’s Analytics chief economist Mark Zandi.