As home prices recover, investors looking to create pools of single-family rental properties could find themselves late to the party as values go up, Capital Economics warned in a report Monday.

Paul Diggle, an economist with the research firm, released a study saying single-family rental housing is an attractive prospect for private-equity firms and hedge funds that want yield on new rental demand. But if prices rise, latecomers will miss the chance to nab lower-priced distressed assets at attractive values.

"The housing crash has created the ideal conditions for institutions to invest in single-family rented housing," said Diggle. "But this looks like a one-time opportunity. As house prices recover, so investor interest in single-family homes will fade. The upshot is that, while single-family rental housing is going to be an important new asset class for some investors over the next few years, it is always likely to be dwarfed by the existing, multifamily REIT market."

Diggle estimates that early entrants into the market found prices about 30% under their peak values and potential yields in the 8%-to-12% range. But gaining that type of advantage is contingent on acquiring homes in distress at discounted prices. As prices rise, that perfect formula will lessen.

"So the opportunity to build profitable portfolios of single-family rentals is time-limited," Diggle said. "Investors will not continue acquiring single-family homes beyond a few more years."

The available supply is still high with 3.8 million homeowners delinquent or in foreclosure and 375,000 REO properties in the system. But the supply on the market is falling rapidly with areas like Phoenix reporting a three-month annualized price increase of 25%.

"At that rate, housing will be overvalued in a year," Diggle asserted.