When the pandemic hit the U.S. in March of 2020, people experienced mass confusion. No one knew how long it would last or what would happen. New business models emerged, and new influences shaped the financial market. One of the most interesting outcomes was the birth of meme stocks. AMC Entertainment Holdings Inc. (NYSE: AMC) and GameStop Corp. (NYSE: GME), for example, grew as never before because of their meme status. The world of crypto followed a similar trajectory as Bitcoin surged and meme coins like DOGE and SHIB became famous with a little help from Elon Musk.
Real estate experienced a transformation as people worked from home and sought to escape metropolitan areas. Mortgage rates dropped, and houses were bought and sold at a rapid clip. Demand surged as houses were selling at what seemed to be outlandish prices. With rental forgiveness programs and loan forbearance, renters felt secure, even in the midst of a global pandemic.
Now it’s 2022, and, although COVID-19 isn’t completely gone, people feel more confident in how to manage it. Most of the meme stocks and coins have fallen back to earth, and the housing market seems as if might be teetering on its own precipice. Mortgage rates are higher than they were two years ago, and it doesn’t even feel as though the same opportunities are available. Why is that?
One reason is the dramatic change in home ownership. Institutions funded $2.5 billion in single-family-rental (SFR) acquisitions in 2021. They committed more than $60 billion in capital to buy SFRl homes in the past year, according to Yardi Matrix’s report.
Yardi Matrix estimates that by the close of this decade, institutions will own 40% of SFR units in the U.S.
Private equity funds are looking to capitalize on a market traditionally owned by individual owners or mom-and-pop companies. It’s a niche market with high-yield returns that has been largely untapped by the major players. Can you blame heavy-hitter institutional buyers for wanting to get in on the action?
However, things are changing. The home and mortgage costs that have continued to rise in 2022 have begun to make it difficult for individuals to purchase homes. At the same time, costs have also reduced the attractiveness of the SFR model for institutional buyers, too. For an individual in late 2022, you would probably delay purchasing a home until costs are more manageable. For an institution, you pivot, entertaining the idea of a build-to-rent (BTR) model.
Institutions in 2021 set a record number of BTR units at 7,700. In 2022, institutional buyers have committed to over 5,000 units in Phoenix, Arizona, and thousands more are planned in trendy hotbeds like Tampa, Florida; Dallas-Fort Worth, Texas; and Charlotte, North Carolina. More than 25,000 units are under construction, and 4,300 have already been completed in the first half of 2022.
Given the information above, what’s your best course of action? No one can offer definitive financial advice for a world in which crashing markets, a pending recession and historic inflation careen up against a global pandemic, food shortages, price gauging and war. However, Benzinga has an idea or two.
It’s clear that there is value in real estate. This high-dollar sector has always attracted and benefitted the wealthiest members of society. With fintech, real estate crowdfunding and fractional real estate ownership, now regular people can get in on the wealth-building this sector offers. If you can’t afford a home right now because of rising costs and mortgage rates, consider investing in real estate investment trusts (REITs) or real estate fintechs like Fundrise or Arrived Homes.
Browse passive real estate investments on Benzinga’s Real Estate Offering Screener
Today’s Private Market Offering Highlights
Arrived Homes, the company that allows investors to buy shares of single-family rental homes, is set to launch 14 new rental properties on its platform with a minimum investment of $100.
Vacation rental investment platform Here is set to launch a new offering for San Diego property with a $100 minimum investment.
Find more current offerings and news on Benzinga Alternative Investments
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AMC Entertainment Holdings Inc, the movie theater operator that investors have turned into a meme stock, completed the listing of its new preferred shares on Monday, setting the stage for a potential capital raise. The novel move allows AMC to sell potentially billions of dollars worth of shares without requiring approval from its shareholders, as it seeks to capitalize on the popularity of meme stocks – shares traded mostly based on social media hype rather than their economic fundamentals. Here is what you need to know about AMC's new preferred shares.
A clutch of stocks favored by retail traders tumbled on Monday in volatile trading as news that UK-based Cineworld warned of a possible bankruptcy sent AMC Entertainment Holdings' shares diving almost 40% on the day that the U.S. movie chain's preferred shares started trading. Bed Bath & Beyond Inc and GameStop Corp also slid as AMC's preferred stock, trading under the ticker "APE", opened at $6.21 on the New York Stock Exchange. AMC common shares were nearly 40% lower at $10.93.
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