Turmoil in Tampa

Executive Summary:

• Tampa City home prices appear to have diverged from the metro trend YTD (26% gap in returns, widest since 2010).
• Tampa is the 6th most concentrated rental market in the country.
• Mom and pops own 1 in 10 homes across Tampa, more than large institutions.
• In the most concentrated rental markets in Tampa, rents are down 2.5% YoY and mom and pops now account for 1 in 5 resale listings.
• 4.2% of the national portfolio of the largest operators lives in Tampa, outside city limits.
• 11% (50 bps of national portfolio) of these large institutional Tampa portfolios are in 2 zips: 33578 and 33579.
• 54% of the large institutional portfolios in Tampa have been acquired since 2020. Newer entrants like First Key, Divvy, and Home Partners of America may face risks due to rent growth assumptions that have not materialized.

Tampa Metro and Tampa City Price Trends Have Diverged

For the last 6 years, Tampa Metro and Tampa City home price appreciation were trending together. That trend changed in 2023. Today, the gap in home price appreciation between Tampa City and Tampa Metro has reached a record 26%, the widest since our analysis began in 2010.

YTD Tampa City's home price appreciation has surged by approximately 20%, while Tampa Metro has experienced only a quarter of this growth. Moreover, Tampa Metro has seen a recent decline in prices, the sharpest since late 2022.

We believe one reason this trend of decoupling could be occurring is due to an over concentration of single-family home rentals, where rent rate growth is not matching projections at the time of acquisition.

Investors play a significant role in many housing markets. They can cause outsized volatility, as was the case with corporate iBuyers in 2022 and more recently with Vinebrook.

In Tampa Metro, investor activity was reasonably strong through 2020. Investors were net buyers in Tampa for a decade.

Today, they have become net sellers. For every home they purchase, they are selling 1.2 homes. This marks the highest rate of investor net selling in Tampa since at least 2010.

Tampa is the 6th Most Concentrated Single Family Rental Market in the Country - This Dynamic Influences Home Prices

Why might this be occurring? One reason is that Tampa ranks as the sixth most concentrated rental market in the U.S. for single-family homes. In the Tampa Metropolitan Statistical Area, nearly 1 in 10 single-family homes are rentals.

Tampa also has a high concentration of large institutional SFR operators, operators that have at least 1000 units in their national portfolio. 7% of single family homes in Tampa are owned by these large operators.

We studied Atlanta in depth a few months ago, where these institutions have 13.3% of their national portfolio. Tampa has 4.2% of this national portfolio.

However, similar to what we observed in Atlanta, this portfolio is not evenly distributed across the Tampa Metro area; it's highly concentrated. In this case, two ZIP codes contain 11% of the entire Tampa portfolio.

Said another way, 50 basis points of the national portfolio of a handful of operators who have 1,000+ units in their portfolio lives in these two Tampa zip codes.

Why does this matter? When the math no longer adds up with rental incomes, these operators will try to sell their properties at the same time.

However, Tampa's housing market isn't solely influenced by large national operators. Mom-and-pop investors also play a significant role. Across Tampa, they own over one in ten single-family homes, greater than the 7% owned by operators with 1000+ units.

For comparison, this situation is inverted relative to Atlanta, where 1000+ unit operators own 13.3% of all single family homes and mom and pops own 7.7% as of today.

Why does this matter? Mom and pops likely don’t have the resources to weather a rental rate storm and would be first to try to exit their positions.

And that's exactly what we're observing in the heavily concentrated rental areas of Tampa today. Mom-and-pop investors are responsible for over 20% of total active resale listings, while the large institutions contribute to less than 10%

Why could this be happening? Rents are down 2.5% in these areas YoY. The math doesn’t work.

When was current Tampa Portfolio acquired?

When these portfolios were acquired makes a difference. Over 54% of the largest operators in the country acquired their current Tampa portfolio 2020 onwards.

However, some were in the market for a long time. Others were new to the scene. Some of the newest entrants, defined as acquiring most of their portfolio since 2020, include:

• Divvy
• First Key
• Home Partners of America
• My Community Homes
• Nuveen
• Starwood
• Tiber Capital

Players with a strong presence prior to 2020 include companies like:

• American Homes 4 Rent
• Invitation Homes
• Tricon Residential

The cohort to watch is the new entrants. Their economics and market assumptions are fundamentally different than those who have a more mature presence in the Tampa market. Specifically, the newer entrants likely assumed rent growth based on historical trends that has not materialized. The situation now is that they are operating in a highly competitive SFR market, against other sophisticated operators, with compressed yields. What will be their next move?

Tampa is on our radar as a market to watch closely. There are actors in the market that are particularly susceptible to rent growth who own a large share of all inventory. They are starting to sell and many others may reach the same conclusion.

Understanding the housing market in real time requires an intimate knowledge of who is in the market and what will likely drive them to make certain decisions. When one domino falls, others do to.

Don’t let the dominos fall on you. Contact us today to stay ahead.

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