On January 25, 2017, the Wall Street Journal reported that Fannie Mae, the quasi-government agency that packages pools of home mortgages into US Government guaranteed long-term bonds, has agreed to back up to $1 billion in debt from Blackstone, an investment group that owns the country’s largest pool of rental homes. For the first time an institutional owner of single-family houses has been guaranteed the debt by a government sponsored enterprise. This signals that the institutional market believes the single family rental business will remain strong for the foreseeable future.
How is this relevant to Main Street consumers and investors?
If you currently own residential rental property and are wondering if you should continue to stay in this business, this event adds further evidence that the business will continue to be a good one.
What is driving this trend?
The major reason for this trend, according to the Wall Street Journal article, is that “homeownership has declined since the housing crisis amid stricter lending standards”. Millennials, who would typically be the current first-time home buyers, are not purchasing homes. While many assume this has to do with this age group fixating over the idea of trendy downtown apartments in big cities, it is actually related more to the fact that they are marrying later in life and therefore do not have the double income which lends to a budget that allows for buying a home. Millennials, like generations before them, want to own homes and the life-changing piece that brings them the ability to reach that dream is marriage.
The Takeaway
This deal between Fannie Mae and Blackstone indicates there is a broad consensus that rental properties will continue to be in high demand. Like most generations before them, Millennials desire to own their home. The difference is that they’ll show you pictures of the house on social media instead of having you over for a housewarming party.
About the author:
Jay Cook, Senior Vice President of Commercial Lending
Jay Cook is uniquely qualified for his position as Senior Vice President of Commercial Lending at Marine Bank. As the former owner and operator of three businesses, he knows what it takes to execute a business plan, keep customers happy and make payroll. His entire 30 year career has been devoted to working with the owners of closely held businesses.