Blackstone Buys Home Partners of America

Investors Bet on US Real Estate Market

Private equity firm Blackstone Group (BX) is betting that red-hot demand for real estate will continue. Blackstone recently inked a $6 billion deal to buy Home Partners of America, a company which buys and rents residential homes. The transaction is a sign that Wall Street thinks the US real estate market will not cool down anytime soon, despite a lack of inventory.

Sales of homes surged last year as mortgage rates fell and people working remotely searched for roomier houses. That growth has been blunted in recent months by a lack of inventory and surging prices. Nevertheless, many investors believe that demand from millennials in their home-buying years will drive growth in the future.

Blackstone Sends a Message

Following the subprime real estate crisis which took place more than a decade ago, Blackstone and other large investment firms bought up houses on the cheap. Blackstone owned tens of thousands of single-family homes, which it rented out via Invitation Homes (INVH).

Blackstone sold its remaining stake in Invitation Homes in 2019, but began investing in real estate again last year. It purchased a $240 million preferred equity stake in Tricon Residential, which buys and rents homes in North America and is now purchasing Home Partners of America. Blackstone joins Brookfield Asset Management (BAM), JPMorgan Asset Management (JPM), and Rockpoint Group in making large investments in residential rental companies.

Rent Prices Rising

Investors are drawn to companies which buy and rent single-family homes because increasing home prices as well as upticks in rent make these investments more valuable. The rental market suffered as people left cities during the pandemic, but rents are climbing again, rising 1.1% year-over-year in March. Rents may increase further as a lack of inventory in the housing market forces potential buyers to continue renting.

The real estate market has been red-hot for over a year. While inventory is low, many Wall Street investors are betting there is still room for growth.

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