Pretium Partners is set to acquire more than 4,000 single-family homes from builder D.R. Horton in a $1.5 billion deal that can not only help boost record-low inventory but could also fuel additional built-to-rent housing growth.
According to the Wall Street Journal, the transaction will include a combination of completed homes as well as homes that are still in development. Most properties are located across high-demand markets in the Southeast and Southwest.
While neither company has officially commented on the deal, the transaction is viewed as good news for a real estate market that has been contending with major inventory challenges for most of 2023. According to a report from HouseCanary, Inc. new listings are down 35.5% from a year ago. Some experts believe the deal could signal investors’ re-entry into the market after high-interest rates pushed them out in 2022.
In addition to easing inventory challenges, the deal could also spark more built-to-rent housing development. Pretium Partners is one of the largest single-family home rental firms in the United States. While the company hasn’t stated if these homes will be sold or transformed into built-to-rent communities, doubling down on the trend could pay off as investors are expected to put up to $40 billion in new funding into built-to-rent housing through 2024.
Built-to-rent development plans are neighborhoods of single-family homes that function like rental units. They offer many benefits of traditional homeownership including space and a backyard; however, they’re maintained by a property management company. Like an apartment building, they usually include a pool, fitness center, and other amenities. Most new single-family developments are popping up in the suburbs of high-growth areas around the country.
Pretium Partners was founded in 2012 and has $50 billion+ in assets with real estate investments across 30 US Markets. The firm had just recently announced deals with Onyx+East and Crescent Communities to build up to 5,000 rental homes over the past two years. Overall, the company has a portfolio of more than 70,000 single-family rental properties.
“We really want to be a leader in build-to-rent and make an impact on solving the great need for housing in the U.S.” Pretium managing director Matt Johnston said at the time.
While low inventory has been devastating for most of the market, top home builders have benefited from the increase in demand. D.R. Horton, America’s largest homebuilder, has seen sales orders jump 73% since the fourth quarter of last year, and the stock has jumped considerably so far in 2023.
As home builders like D.R. Horton ramp up operations to meet the spike in demand, partnerships with infrastructure development firms become increasingly important. In order to expedite development, builders can contract the land out to companies like Jobalia which really serve as the start of the supply chain.
These companies can secure entitlements and complete every aspect of infrastructure development including financing, permitting, and platting. Once finished, builders can purchase the land back and efficiently continue development. Trusting infrastructure developers that have the ability to quickly deliver finished lots can help builders hit the gas on growth and new construction.
The deal between Pretium Partners and D.R. Horton signifies a positive shift in the market, and as new home demand continues, it will also pave the way for additional partnerships between home builders and infrastructure development firms to meet the demand.