Starwood Waypoint Residential Trust agreed to merge with Colony American Homes, in a transaction that prices Colony at approximately $1.5 billion. Both boards approved the deal that is expected to close in the first quarter of 2016. The deal shows that both companies are planning long-term for the single-family rental industry. Starwood and Colony own over 30,000 homes together, valued at nearly $8 billion.
Starwood is not the only company acquiring after the housing market crash. Blackstone Group LP spent almost $19 billion acquiring and adding value to about 50,000 foreclosed homes, which are now rented through Invitation Homes LP. Gauging from Starwood and Colony’s merger, home ownership in America will remain low while many prefer to rent. Since the housing crisis, Americans have been pushed out of the home buying market due to tougher lending standards. With homeownership at its lowest levels in 50 years, Americans can expect rents to continue to rise.
Rents are steadily climbing across the country, but increases are not expected to last in places with weak wage growth. Although single family rental homes are doing well, many question how long the trend will last. However, companies like Starwood and Colony are profiting from the trend, as the two project as much as $50 million in cost reductions resulting from the merger.