Saturday, August 12, 2017

"A big Wall Street firm bets the American Dream is dying"

Executives of Invitation Homes tour a home on Casaba Ave. in Canoga Park that the company recently bought, 
fixed up and turned into a rental property. (Mel Melcon/Los Angeles Times via Getty Images)
A big Wall Street firm is betting that America is likely to become the United States of Renters.
On Thursday, private equity behemoth Blackstone announced a major merger of its own Invitation Homes Inc. with another company, Starwood Waypoint Homes. It's the kind of news that makes most people's eyes glaze over. But after the deal is done, Invitation Homes will be America's biggest landlord of single-family homes, owning more than 82,000 houses, mostly in major cities like Chicago and Miami.

In plain speak, this means a top Wall Street company and a top real estate company think there's a lot more money to be made renting property to Americans who either can't afford to buy or don't want to become homeowners.

"This merger creates the leading single-family rental company in the United States," said Fred Tuomi, CEO of Starwood Waypoint Homes. He called it a "win-win for both residents and stockholders."

Home ownership in the United States hit a 50-year low in 2016. It's sparked a big debate in economic and cultural circles: Is the American Dream of owning a home dying? Or is this just a temporary blip?

The New York Federal Reserve keeps reminding people that Millennials (among others) are so saddled with student loan debt that they aren't able to buy homes like generations past.  So there's an economic reality holding back homebuying. Home prices have also been rising far faster than incomes, especially in cities like San Francisco and New York.

Cultural shifts are also underway. In surveys, Millennials often say they want to own homes one day, but they are a generation that's embraced the "sharing economy." They don't like to own much. They take Lyft and Uber instead of owning a car. They tell their parents and grandparents "no thanks" when they are offered the family china or trinkets. They prefer to spend their money on experiences -- eating out, concerts, travel, gyms -- instead of stuff.

The head honchos at Blackstone, Invitation Homes and Starwood are making a clear vote about what they think the future holds: More renters. These aren't cheap homes. The average rent is just over $1,600, according to Starwood. Renting is going upscale. Homebuilders and realtors, however, think they are too pessimistic about the American Dream....MORE