In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Friday, August 12, 2022

Lawler: American Homes 4 Rent Slashing MLS Purchases of Single Family Homes

by Calculated Risk on 8/12/2022 04:38:00 PM

From housing economist Tom Lawler: American Homes 4 Rent Slashing MLS Purchases of Single Family Homes

In American Homes 4 Rent (AMH) earnings conference call last week, officials said that the company was slashing its MLS-based purchases of single-family homes in the second half of 2022. Here are a few excerpts:

“Now, turning to our investment strategy more broadly. Interest rates have risen, while home prices have yet to react in a meaningful way. In addition, these are uncertain times in the capital markets. As such, we have temporarily scaled back one-off MLS transactions to allow the market time to recalibrate and stabilize. This will preserve dry powder for future investment.” Here is a response to a question of whether or not the company was “entirely out” of the MLS market or third-party homebuilder purchases.

“Yes. Thanks Brad. We're not 100% out. We're still acquiring, but it has had a very significant or very reduced level, probably more than 80% reduction from what we were seeing earlier this year. It is based on what the attractive opportunities are when you're underwriting many homes, and we're starting to see a growing list of opportunities on the MLS. The MLS has many more homes today available, the times that they're sitting there is much greater. We're starting to see opportunities.”

“With respect to other acquisition channels, it is a very interesting time. We are receiving many inbound telephone calls that we were not receiving previously, whether it's from owners of small portfolios or even national homebuilders with excess inventory. Where we are, though, in those -- in that process is we still have a gap in our bid to ask expectations between buyer and seller.”

The company noted that it has not lowered its projections for its “wholly owned development activities” (or its “build to rent”) program. AMH has been very aggressive in acquiring lots for its build to rent program, increasing the number of lots it owns or controls (and most owns) from 2,000 at the end of 2017 to 9,000 at the end of 2020, 18,000 at the end of 2021, and well over 20,000 at the end of this June.

You can read the transcript of the AMH earnings conference call here.

If you are interested in this topic, an article published today by Bloomberg (link shown below) is worth reading: Housing Slowdown Chills Investors Who Supercharged US Market