JPMorgan buys $1 Billion in rental homes as the American rent-aissance continues

Large Banks are joining the rent-aissance! As fewer people buy houses, banks are shifting from lending money… over to rent properties to their customers. JPMorgan announced this week that it is partnering with property giant Haven Realty Capital in order to build $1 Billion of single-family homes to rent out. JPM anticipates a rental boom as US home sales continue to slide.

  • Betting on the suburbs: JPM & Haven plan to purchase 250 homes “built to rent” in the Atlanta region… and then develop whole communities of suburban rental homes.
  • Revamped renting: JPM launched a platform to assist landlords by digitizing monthly rental payments — 78% are still paid by check right now.

Renting has become the new buying… as many cannot afford to purchase a home right now. Since mortgage rates have more than doubled over the past year making homeownership too expensive for many. Although banks are earning higher interest, mortgage demand is down 40% compared to a year ago.

  • This is bad news for buyers… and banks: Last quarter, JPM issued $15B in mortgage loans — 46% down from the year before. JPM laid off mortgage employees this year due to slumping revenues and lower profits.
  • Rival Wells Fargo's mortgage volume dropped 90% last year and the company also laid off mortgage workers. Rocket Mortgage and Redfin have also reduced staff. Some mortgage startups have even 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. Built-to-rent was first popularized by builders during the Great Recession to allow them to continue building even though people were not buying. Due to rising rates and high costs of construction materials, builder confidence has dropped to its lowest point since 2012. Banks could experience another boom in build-to-rent by shifting their strategy.