- This regional housing market has a big institutional sell-off underway. But why?
This regional housing market has a big institutional sell-off underway. But why?
There's no massive national flood of inventory coming from institutional landlords. But they are pulling back in some pockets.
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Last week, ResiClub published an article titled: “There’s no flood of institutional homes hitting the housing market.” The piece argued that while institutional home buying has slowed way down, given that few homes available for purchase today pencil, there isn’t a massive nationwide sell-off occurring. For evidence, we pointed to the fact that Invitation Homes and American Homes 4 Rent, which were “net sellers” in the first half of 2023, were once again “net buyers” in the third quarter.
At its core, the piece was a rebuttal to online chatter about a massive flood of national housing inventory coming from institutional landlords.
That said, there are certainly regional pockets of the country, where institutional landlords are selling off a lot of inventory.
Look no further than Jackson, Mississippi.
“Large SFR operators currently account for one in every ten new listings in Jackson even though they only own 1% of the entire housing stock,” wrote Parcl Labs, the nation’s go-to source for real-time real estate data analytics.
In other words, institutional homebuyers own 1 in 100 single-family homes in Jackson, Miss., however, they account for 1 in 10 homes currently listed for sale.
“This uptick in [institutional] listings [in Jackson] suggests a rapid liquidation strategy,” wrote Parcl Labs.
“Large operators don't spread their units evenly across metropolitan areas; instead, they concentrate their efforts in specific submarkets where they believe their rental product aligns well with local demand. We've demonstrated this trend in Atlanta, and the same pattern holds true in Jackson,” wrote Parcl Labs.
The pockets with the most institutional homebuyers in Jackson are also the very places with the most homes for sale in Jackson.
“In Jackson, MS, just over 1% of all single-family homes are listed for resale. This figure rises 3 fold to 3% in ZIP codes with a strong institutional presence. The 39206 ZIP code in Jackson leads the nation in the proportion of homes listed for sale, at 3%” wrote Parcl Labs.
The interesting part: One big investor is the primary seller. Parcl Labs didn’t provide the name of the firm.
“One national operator, with a portfolio of over 20,000 units across the U.S. (including 800 in Jackson), commands this ZIP code with over 100 units. They're currently selling a fifth of these units. As a result, one entity now accounts for 1 in 5 resale listings 39206 and is aggressively cutting prices,” wrote Parcl Labs.
Jackson also happens to be one of the regional housing markets that is softening the fast right now. While national house prices are up slightly year-over-year, Jackson house prices are down year-over-year. And while national inventory levels are down year-over-year, Jackson inventory is up year-over-year.
“The timing of large operator dispositions corresponds to declining home prices in Jackson,” wrote Parcl Labs. The local home price declines are even more pronounced in the Jackson ZIP codes with heavy institutional presence.
This institutional selloff has also translated into mom-and-pop landlords starting to sell off in those Jackson ZIP codes.
“Large operators may lack on-the-ground teams, even in locales where they have a significant presence. Meanwhile, in Jackson, the mom-and-pop owners, intimately familiar with the pulse of their neighborhoods, can't help but notice the proliferation of for-sale signs. This awareness has become particularly acute as the 39206 area experiences what can be likened to a fire sale, a situation that has not only caught the attention of these smaller operators but also prompted them to enter the resale fray. Operators owning between 2-9 units constitute 11% of the 39206 zip code's resale market, and 10% in the entire Jackson area. This influx is exacerbating the race to the bottom, as an oversupply meets lagging demand, subsequently exerting downward pressure on prices,” wrote Parcl Labs.
Are you familiar with this market? If so, I’d love to hear your thoughts: [email protected]
The interactive chart below shows monthly inventory levels among the nation’s 200 largest housing markets.