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Rental securitization market could hit $5 billion next year

Deutsche Bank: Student loan debt locks out potential homebuyers

Fed Money
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Eight years since the American homeownership rate hit its peak, the market for single-family rental securitizations is set to grow larger and larger.

One of the most talked about potential asset classes this year, the securitization of rental income started off slowly with a few deals here or there. The purchasing of properties for potentially pooling into securitizations, on the other hand, hit $15 billion, with Blackstone totals equal to nearly half of that. Of that, up to $5 billion holds securitization potential.

"We estimate that institutional investors have purchased 90k homes around the country over the last year," said a team of analysts at Deutsche Bank (DB), "with thousands more added every month."

More than 50% of the homes were purchased in cheaper-ticket-price markets in the South and another 33% in the West. In other areas of the United States, property prices made the purchase of homes for renting less profitable. According to rental data provider, RentRange, the most investor-saturated markets are in Atlanta and the metro area. Charlotte, Tampa and Jacksonville also make a large portion of the list.

Deutsche Bank believes the trend will continue and this market will grow for some time, perhaps for a long time.

"The growth over the last two years and the beginning of a securitization market can be traced back to the magnitude of the decline and the eight years that have passed since the housing market peaked, which have perhaps forever changed the way households view the choice of buying a home," the report said.

The report cites the rise in student loan debt levels as weighing heavily on the potential homeowners mind. Student loan debt has been the only type of household debt that steadily increased through the Great Recession, they note, rising from $579 billion in 2008 to nearly double that level currently.

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