In 2008, the collapse of major lenders and investors set the fire of the global financial crisis. Recently, Wall Street announced a similar activity, its latest trillion-dollar idea that involves slicing and dicing debt tied to single-family homes and selling the bonds to investors around the world.
This new activity reminded people of the global financial crisis on American economy, and already some members of Congress and economists are worried about another credit bubble. However, others have a positive attitude toward this activity, and regard it as a great potential investing opportunity. Jade Rahmani, a real estate analyst with Keefe, Bruyette & Woods, wrote a recent report that the investment and lending opportunities are immense and perhaps just beginning. According to the K.B.W. report, in just the last two years, large investors have purchased as many as 200,000 single-family houses and are now renting them out.
American Homes 4 Rent is the first company that tests the frontier in securitization. Although this activity sounds similar to most people who suffered from the financial crisis, there is a twist this time. Investment bankers and lawyers are now lining up to finance investors, from big private equity firms to plumbers and dentists moonlighting as landlords, who are buying up foreclosed houses and renting them out.
Last week, American Homes 4 Rent had a conference in Las Vegas, and talked to prospective investors about selling securities tied to $500 million of debt. In addition, American Homes 4 Rent, which went public in August, has tapped JPMorgan Chase, Goldman Sachs, and Wells Fargo as its bankers for a debt deal that is expected to be sold by the end of the first quarter.
Because these new types of investments are in their infancy, homeowners, renters, and investors are uncertain about their potential future. Nonetheless, American Homes 4 Rent is the start of new investment activity in the real estate market.