fbpx

Wall Street-backed landlords have cut jobs and slowed purchases with high borrowing costs weighing on the housing market.

Retired baseball star Alex Rodriguez took to LinkedIn in late 2021 to ask for help: He’d invested alongside Starwood Capital Group in a single-family rental company that was buying 1,000 homes a month and needed to hire as many as 500 people to keep up.

“The right time to get on board is now,” he wrote in a post.

More than a year later, the company, Tiber Capital Group, is pulling back, the victim of a sudden housing slowdown that caught many sophisticated players by surprise. The Capitol Heights, Maryland-based firm has sharply curtailed real estate purchases and fired hundreds of workers, according to people familiar with the business, who asked not to be named because the matter is private.

The rapid growth of companies such as Tiber has been one of the defining features of the US housing landscape in recent years, adding to a homebuying frenzy that peaked with the largest single-family landlords buying more than 10,000 homes a month. Now, Tiber and its peers have become symbols of a dizzying retrenchment — cutting jobs and slamming the brakes on buying while they wait for the market to improve. 

Invitation Homes Inc., which has more than 83,000 houses in its portfolio, said Wednesday in its earnings release that it expected to buy, at most, about half as many properties this year than it did in 2022 in its wholly owned portfolio. The company also noted that it would maintain “an opportunistic approach” based on market conditions.

Many landlords are still bullish on rental homes. They generally aim to hold onto properties for a longer length of time than other buyers, which can help insulate them from the price corrections that started to slam the market last year. But firms that earn fees for deploying capital are getting squeezed, and a dearth of deals has pushed many to cut staff.

Read more about the housing slump that has pummeled Wall Street and tech-backed buyers.

The job cuts have spread throughout the single-family rental space. Amherst, among the largest single-family landlords, laid off about 20% of its staff across two rounds of cuts, in November and January, people familiar with the matter said. A representative for Amherst said the layoffs didn’t affect the firm’s property-management capabilities, and that the company expects the industry to increase purchase activity this year.

It remains unclear when single-family rental companies will ramp up acquisitions. In the current environment, holding off from purchasing more homes makes sense, according to Jeff Langbaum, who covers publicly listed single-family landlords as an analyst at Bloomberg Intelligence.

Another company, Roofstock, laid off 20% of its staff late last year. Chief Executive Officer Gary Beasley said in an email that the layoffs were necessary to align costs with market activity. But the industry shakeout and recent price declines may create opportunities for investors who don’t rely on debt.

“Acquisition activity is indeed way down, driven principally by the run-up in borrowing costs,” said Beasley, Roofstock’s CEO. “There is a good opportunity emerging for unlevered buyers to come into the market and take advantage of a much less frothy environment.”

(Updates with Invitation Homes outlook in seventh paragraph.)

 BullsNBears.com was founded to educate investors about the eight secular bear markets which have occurred in the US since 1802.  The site publishes bear market investing recommendations, strategies and articles by its analysts and unaffiliated third-party and qualified expert contributors.

No Solicitation or Investment Advice: The material contained in this article or report is for informational purposes only and is not a solicitation for any action to be taken based upon such material. The material is not to be construed as an offer or a recommendation to buy or sell a security nor is it to be construed as investment advice. Additionally, the material accessible through this article or report does not constitute a representation that the investments or the investable markets described herein are suitable or appropriate for any person or entity.