Why the 2023 Housing Market Makes Wall Street Types Nervous: An Institutional Homebuyer’s Surprising Change in Buying Habits

**Institutional Homebuyers in the Housing Market: Challenges and Trends**

**Stagnation in Homebuying Strategies**

According to Tejas Joshi, the director of single-family residential at Yieldstreet, the housing market is currently in a state of pause for homebuying strategies. In an interview with Fortune, Joshi explained that the combination of increased interest rates and high house prices has significantly reduced the potential return for single-family rental investors like Yieldstreet. Joshi stated that for Yieldstreet to resume purchasing homes, there needs to be a decrease in interest rates or a decline in house prices, or both.

**Stabilization of House Prices and Interest Rates**

As of August 2023, house prices in the majority of housing markets have stabilized after a mild price correction in the previous year. However, interest rates have also seen an increase, adding to the challenges faced by institutional homebuyers. The absence of any relief in interest rates and housing prices explains why Yieldstreet, which currently owns around 700 homes, has not made any purchases in 2023. Instead, they have become net sellers, selling approximately 10 homes.

**Limited Expectations for House Price Declines**

Tejas Joshi doesn’t expect significant relief in the form of house price declines in the near future. According to him, national home prices have bottomed out, mainly due to a lack of inventory in the market. While some markets with higher inventory levels may experience further declines, most markets are not expected to see major drops in house prices.

**Hopes for Falling Interest Rates**

Joshi hopes that interest rates will start to fall soon, considering the significant deceleration in inflation. A decrease in interest rates would lead to improved returns or cap rates, attracting more institutional homebuyers back into the market. Yieldstreet has ambitious plans to grow its single-family home portfolio from $200 million in value at the beginning of 2023 to $1.5 billion by 2028, marking a 650% increase in its holdings.

**Other Institutional Homebuyers Experiencing a Slowdown**

Yieldstreet is not the only institutional homebuyer that has been affected by the current market conditions. American Homes 4 Rent, which owns 58,693 homes, has been selling more homes than it has been buying in 2023. Similarly, Invitation Homes, the largest owner of U.S. single-family homes with a total of 82,837 homes, has sold off more homes than it has acquired this year. However, Invitation Homes anticipates resuming its role as a net buyer in the third quarter of 2023, following its recent acquisition of a 1,900-home portfolio.

**Factors Needed for Another Institutional Homebuying Surge**

According to Noel Christopher, a leader in the single-family rental space, there are several factors that need to occur to spur another surge in institutional homebuying. These factors include stabilization in the debt markets and an increased supply of resale homes. Christopher believes that institutional homebuyers with a long-term view are preparing to buy and dismisses speculations that they will dump rental homes to exit the trade.

**Temporary Slowdown in Institutional Homebuying**

Noel Christopher views the current institutional homebuying slowdown as temporary. He expects that the market will eventually stabilize, the debt market will improve, and there will be an increase in the supply of homes available for purchase by institutional homebuyers.

**Stay Updated on the Housing Market**

For the latest updates and news on the housing market, follow Lambert, the author of this article, on Twitter at @NewsLambert.

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