For the past few years, large institutions have been buying up single-family homes in droves. But now, on the edge of collapse, this purchase epidemic is starting to look foolish. In 2020 and 2021, a niche market that produced reliable, incredibly high yields was real estate. But large companies are about to take a mega-hit on the housing market, and the market is about to do a backflip.

What caused the institutional housing market crash?
The institutional housing market crash was caused by a variety of factors. First and foremost, there was an over-reliance on debt financing. Large institutions took on massive amounts of debt in order to purchase properties. This created a situation where these institutions were incredibly leveraged and vulnerable to any sort of market shift.

Another factor that played a role in the institutional housing market crash was the fact that many of these properties were purchased sight unseen. That is, companies would buy homes without ever actually seeing them in person. This created a situation where there were a lot of homes that were not up to par with what was promised.

Lastly, another factor that contributed to the institutional housing market crash was that many of these homes were purchased in areas already experiencing declining property values. This meant that these institutions were already facing headwinds when the market finally did shift.

What does this mean for you?
If you’re an institution considering buying single-family homes, beware! The market is about to do a backflip, and you could take a large hit. Instead, focus on other needs that may be more stable in the coming years.