This regional housing market is the epicenter of institutional home buying

The opportunity presented by the Pandemic Housing Boom was irresistible for single-family investors. With historically low mortgage rates, readily available capital, surging rental income, and soaring home values, it attracted a wide range of investors, from individual landlords to Airbnb hosts.

That housing boom also brought out large institutional players, like Invitation Homes and American Homes 4 Rent, in full force. It was an institutional frenzy.

On an aggregate level, they account for only a very small percentage of the market, with institutional firms (operators owning at least 1,000 homes) owning 0.73% of the total single-family housing stock, according to Parcl Labs. However, when you dig deeper, you'll see that they are becoming a significant portion of the market in specific regional pockets of the country.

Indeed, according to analysis conducted by Parcl Labs, 36.8% of all institutional-owned homes can be found in just 6 metropolitan housing markets: Atlanta (where 13.3% of institutional-owned homes can be found), Phoenix (5.4%), Dallas (5.4%), Houston (4.3%), Tampa (4.2%) and Charlotte (4.2%).

While institutional firms own just 0.73% of the U.S. single-family housing stock, they own 4.4% of the Atlanta housing stock. In other words, Atlanta is the epicenter of institutional home buying. But why?

To gain a better understanding of the situation in Atlanta, ResiClub reached out to Parcl Labs, a provider of real-time data and mapping on institutional ownership, covering everything from acquisition and rental to sale throughout the country.

“Atlanta is a clear outlier, with 13.3% of large operators' total portfolios concentrated in its housing market. That is, of all properties across the U.S. owned by the large SFR operators, roughly one out of every eight is located in Atlanta,” Jason Lewris, co-founder of Parcl Labs, and Lucy Ferguson, VP of strategy at Parcl Labs, wrote in recent report.

Hank Miller, a broker in the Atlanta market, tells ResiClub that institutional firms started dipping their toes into the market following the 2008 bust.

"I’ve been appraising and selling in Greater Atlanta since ’94. While it’s fashionable to loathe and deride institutional investors, they were instrumental in cleaning up the stagnant inventory from the last crash. I was one of many appraisers grinding distressed properties over a good 4-year span… These firms bought packages of homes that could not otherwise be absorbed. They brought them back into service mainly as rentals. They were the buzzards and opossums of that time, cleaning things up. Institutional investors remain, now we them involved with BTR communities. It’s reasonable to say they’re helping builders keep the wheels turning, filling the voids due to lost home buyers” Miller says.

The primary reason that institutional firms like a housing market like Atlanta, is they like its long-term outlook. Atlanta is a fast-growing population center, with good upside on rents. And so lots of institutional buyers have piled into the market.

“Large operators do not evenly disperse their portfolios across the U.S.—they focus on markets with favorable economic conditions and demographics that are a good fit for their SFR product,” writes the Parcl Labs team.

Across much of the country, large institutional players like Progress Residential and Tricon, went on home buying sprees during the pandemic.

Just look at the numbers in Atlanta, where 52% of institutional-owned homes there were bought in either 2020 (13.5%), 2021 (21.9%), or 2022 (16.6%).

That housing fervor that commenced in the summer of 2020 began to wane as interest rates surged in the summer of 2022. The conjunction of rising interest rates and a shortage of available homes has resulted in a sort of lull for institutional home purchases. In fact, just 3% of institutional-owned homes in Atlanta were bought this year.

Here’s where things get really interesting: 30% of large operators’ Atlanta portfolios are concentrated in just 11 ZIP codes.

“Large SFR operators haven't just converged on the Atlanta metro area as a whole within a similar timeframe—they've zeroed in on the very same set of ZIP codes within it” writes the Parcl Labs team. “The ZIP codes, rank-ordered based on concentration, are: 30016, 30135, 30349, 30253, 30052, 30157, 30281, 30039, 30058, 30134, and 30132.”

In the 30088 ZIP code in DeKalb County, institutional firms own a staggering 13% of the single-family properties. That’s nearly 18 times greater concentration of ownership compared to the nation as a whole, where institutional firms own 0.73% of the total U.S. single-family stock.

The map above shows that there are pockets of Atlanta where large operators already dominate mom-and-pop landlords.

“While large operators compete amongst themselves, they also contend with smaller regional businesses and local mom & pop ventures. In Atlanta, these large operators account for about 45% of all recent single-family rental activity, boasting a commanding presence in over 50% of rental listings in 31 ZIP codes,” writes Parcl Labs.

The big picture: While institutional firms are a small player in the overall U.S. housing market, they’re a huge player in some pockets of the country. This newsletter will keep an eye on them, and flag readers if any big shifts start to happen in that space.

If you don’t already, follow Parcl Labs and Jason Lewris on X.com (formerly Twitter). The hyperlocal housing data and insights that Parcl Labs is producing, including what you see above, are simply outstanding.