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https://content.fortune.com/wp-content/uploads/2023/08/GettyImages-1440848116-e1691852078299.jpg?w=2048“We’re pretty much on pause across all [homebuying] strategies,” Tejas Joshi, director of single-family residential at Yieldstreet, told Fortune in January. The combination of spiked interest rates and sky-high house prices significantly reduced the potential return for single-family rental investors like Yieldstreet. Joshi mentioned that for Yieldstreet to resume purchasing, either interest rates would have to decrease or house prices would need to decline—or both.
Fast-forward to August 2023, not only have house prices in the majority of housing markets stabilized after last year’s mild price correction, but interest rates have also seen an increase.
The absence of any interest rate and housing price relief explains why Joshi has recently informed Fortune that through July, Yieldstreet, which owns around 700 homes, has not made a single purchase in 2023. They are actually functioning as net sellers this year, with a total of about 10 homes sold.
Heading forward, Joshi doesn’t expect much relief in the form of house price declines, adding that “I think [national] home prices have bottomed at this point. My expectation was they’d fall, but because of no inventory in the market, prices found the floor. I don’t expect major declines in most markets—though some markets where inventory is higher than prior to COVID, could fall further.”
Instead, Joshi hopes that interest rates soon start to fall, given that inflation has decelerated significantly. If that happens, returns (i.e. cap rates) would improve and more institutional home buyers might jump back into the market. By 2028, Yieldstreet hopes to grow its single-family home portfolio from its $200 million value entering 2023 to $1.5 billion. If the company goes through with it, that’d mark a 650% increase in its single-family holdings by 2028.
Yieldstreet isn’t the only institutional homebuyer that has taken a breather.
Look no further than American Homes 4 Rent, which through June has bought 781 homes in 2023 while selling off 1,081. Simply put, through the first two quarters of 2023, American Homes 4 Rent is a net seller.
Through June, Invitation Homes—the country’s largest owner of U.S. single-family homes—has sold off more homes this year (675) than it has acquired (470). At the end of the second quarter, Invitation Homes owned a total of 82,837 U.S. homes—down from 83,148 homes at the end of Q3 2022.
Invitation Homes is poised to resume its role as a net buyer in the third quarter of 2023. This anticipation stems from its recent acquisition of a “portfolio of nearly 1,900 homes for approximately $650 million” on July 18. It’s important to note that Invitation Homes procured this 1,900-home portfolio from another institutional firm, thereby indicating that, on a net basis, this transaction did not contribute to an overall increase in institutional ownership of U.S. homes. (Invitation Homes declined to disclose to Fortune the identity of the firm from which it obtained the homes.)
What would have to happen to spur another institutional homebuying surge?
“Stabilization in the debt markets, for one. Also, [increased] supply of resale homes. Until that [debt] market unsticks [through lower interest rates], there needs to be more homes to buy at scale,” Noel Christopher, a long-time leader in the single-family rental space, tells Fortune. “Those [institutional homebuyers] with a long view are gearing up to buy; I know this for sure. There has been much speculation from YouTube content providers who believe the large investors will dump rental homes to get out of the trade. That has been debunked many times.”
In Christopher’s view, the ongoing institutional homebuying slowdown will prove “temporary.”
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