Can Blackstone Balance the Real Estate Market With $6B Housing Bet?
With Blackstone investing in the housing market, real estate pricing could falter or find its footing. Will Blackstone's $6 billion housing bet help?
June 23 2021, Published 10:26 a.m. ET
In the latest deal, Blackstone Group Inc. (NYSE:BX) is getting in on the housing craze. The investment firm has purchased a leading company in the rent-to-own space at a crucial time when the median U.S. existing home price is up 24 percent from a year ago.
Why is Blackstone buying houses, and will it help or hinder inflammatory real estate costs?
Blackstone purchased Home Partners of America for $6 billion.
Blackstone has acquired Home Partners of America, which is a nationwide company that owns 17,000 single-family units. The business purchases homes, prepares them, and rents them out to tenants who have the option of eventually purchasing the home. The business model increases profits for the real estate company and keeps the rental market filled.
Blackstone bought 17,000 homes to get in on high real estate returns
It isn't a surprise that Blackstone got in on the home buying craze. The demand for homes has increased dramatically over the last year and a half. As of April 16, the demand for U.S. single-family homes was 3.8 million above the available supply. The home shortage is a 52 percent increase from 2018.
Most of the shortage is driven by the COVID-19 pandemic, during which home sales surged as families sought safety within their own spaces. However, experts say that the strong demand and price points aren't going anywhere, at least not anytime soon.
Blackstone's acquisition of Home Partners of America drives this point home even more. Given that the investment firm has a $118 billion market cap, the bullishness regarding real estate is a buy signal for many investors.
Stephen Schwarzman, the CEO and co-founder of Blackstone, said in an interview, "It also presents a lot more opportunities because prices are higher, more people will sell. What we want is, because we're fundamentally in the private markets, that the only reason to buy something is to make it much better."
Blackstone's role after the 2008 housing crisis
Following the subprime mortgage crash, Blackstone swooped in on the mass amount of foreclosed homes that were selling at a low rate. They used this opportunity to prop up pricing for the sake of the overall market.
Some people credit Blackstone for balancing the market during a time when prices would have otherwise remained low. Now, the situation is reversed. Prices are massively high and Blackstone's involvement could teeter the market even more toward high prices.
What's the outlook for BX stock, and how will housing costs hold up in the future?
Blackstone stock is beating the market average in the short term. Investors can count on a consistently high dividend from BX. However, their reentry into real estate after a 2019 sell-off of Invitation Homes could bring some volatility in the future.
Housing costs might not be so fortunate. Blackstone's involvement has the potential to squeeze demand and push prices up even more, which is a lingering pain point for the average American.