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JPMorgan invests $1B in rental homes as pricey houses kick off an American rent-aissance

Friday, November 18, 2022 by Robinhood Snacks |

Big Banks join the rent-aissance… Fewer people are buying houses, so banks are shifting their focus from home loans to rental properties: this week JPMorgan said it’s teaming up with property giant Haven Realty Capital to build $1B worth of single-family homes for renters. As US homes sales continue sliding, JPM is preparing for a rental surge:

  • Bettin’ on the ’burbs: JPM and Haven plan to buy 250 “built to rent” homes in the Atlanta area, and then develop entire communities of new suburban rental homes.
  • Renting, revamped: Last month, JPM started testing a platform that aims to help landlords digitize monthly rental payments — 78% of which are still paid by check.

Renting is the new buying… because many can’t afford to buy right now. Mortgage rates have more than doubled in the past year, making the long-term cost of homeownership prohibitive for many. While banks are earning higher interest, mortgage demand has plunged 40% from a year ago.

  • It’s bad for buyers… and for banks: JPM issued $15B of mortgage loans last quarter — 46% less than a year ago. JPM laid off mortgage workers this year as slumping revenue dented profits.
  • Rival Wells Fargo’s mortgage volume has fallen 90% since last year, and it’s also laid off mortgage workers. Rocket Mortgage, Redfin, and Better.com have also cut staff, and some mortgage startups have gone bankrupt.
THE TAKEAWAY

It pays to be pragmatic… JPM could capitalize on America’s housing-affordability crisis by capturing a new generation of renters. Builders first popularized the build-to-rent model during the Great Recession as a way to keep building even when people weren’t buying. Now builder confidence is at its lowest level since 2012, thanks to soaring rates and construction material costs. By shifting strategy banks could see another build-to-rent boom.