“Last year, the amount of institutional investors activity exploded. What you’re seeing now is the natural digestion of that exponential growth. That means maybe a slowdown in how many home they acquire, it may mean letting go employees in areas where it doesn’t make sense.”

These investors are moving their focus from acquisition to profitability, hoping to show Wall Street that the business model is not only feasible but highly profitable. The American Home now boasts 2,500 homes in Atlanta; Nashville, Tenn.; Orlando and Tampa, Fla.; and Charlotte, N.C.

Edelheit said rental demand is tremendous, and management is working well, but the model is still too green for the larger investment community. “You look at the stock prices of the companies that are public, and it’s pretty clear that Wall Street remains unconvinced in the single family rental model, and I think it’s natural for these firms to start right sizing and make sure that they are profitable.”

That could mean consolidation, with some of the larger firms that have stronger management structures buying up smaller players. Large-scale investors are still a relatively small segment of the 14 million single family rental market, but it appears they are here to stay, despite the recent volatility. Smaller investors, however, may be moving on, having exhausted their cash and their credit opportunities.

(Read more: Home prices across the US defy gravity)

Last spring, Redfin was running seminars for small “armchair” investors on how to buy and manage single family rentals. The classrooms were packed.

“There was a surge because people read the papers—in March, April, there was a bull market in housing. Suddenly at every cocktail party somebody wanted to make a killing in real estate,” Kelman said. “Some wanted to ride the wave, but some just caught it late.”

—By CNBC’s Diana Olick. Follow her on Twitter @Diana_Olick.

Questions?Comments? facebook.com/DianaOlickCNBC

Article source: http://www.cnbc.com/id/100988740

Paulson, speaking at CNBC’s Delivering Alpha conference, said he is still high on housing.

“It’s not too late to get involved. I still think buying a home is the best investment any individual can make. Affordability is still at an all-time high,” said Paulson.

Large-scale investors, however, may not be behind the surge in home flipping. They may, in fact, be the cause of it.

“Now that the institutional investors are doing buy and hold, a lot of these guys [individual investors] can’t compete with their checkbooks,” said Rick Sharga, formerly an executive at Carrington who now works for Auction.com. “In some cases the individual investors are flipping them to the institutional investors.”

While many of the large funds have teams that renovate homes, in some cases they would rather pay a premium for a move-in-ready property, rather than waste time and money remodeling.

“So the flippers are kind of the in-between middleman who is getting the property into good rentable condition and then selling to the institutional investors,” explained Blomquist.

(Read more: Map: Tracking the US real estate recovery)

Article source: http://www.cnbc.com/id/100896253

(Read More: The Other Housing Recovery: Agents’ Pay)

“Physical real estate is attracting institutional investors because there is a positive spread between how much it costs to finance real estate versus the income generated,” added Goldfarb.

On a total return basis, the FTSE NAREIT All REITs Index gained 5.80 percent in April and the FTSE NAREIT All Equity REITs Index gained 6.33 percent, while the SP 500 was up 1.93 percent.

While almost all sectors of U.S. REITs have delivered double-digit gains year-to-date, some are outshining others. Health care was the industry’s top-performing major sector, with a 23.77 percent total return, according to the NAREIT report. Lodging was up 17.51 percent, and retail was up 17.34 percent, led by shopping centers.

An improving economy is clearly sending consumers back on vacation and back to the malls. Health care has been a consistent leader, as Baby Boomers fuel the aging population.

(Read More: Map: Tracking the US Real Estate Recovery)

A product of the real estate recovery, Mortgage REITs were up nearly 19 percent and Home Financing REITs were up over 17 percent. Commercial financing is driving much of the former, but these sectors are benefitting from a potential thaw in mortgage credit in residential as well.

“There are signs that conditions are beginning to loosen,” according to analysts at Capital Economics, who also noted that mortgage demand is on the rise.

Article source: http://www.cnbc.com/id/100734766

(Read More: The Other Housing Recovery: Agents’ Pay)

“Physical real estate is attracting institutional investors because there is a positive spread between how much it costs to finance real estate versus the income generated,” added Goldfarb.

On a total return basis, the FTSE NAREIT All REITs Index gained 5.80 percent in April and the FTSE NAREIT All Equity REITs Index gained 6.33 percent, while the SP 500 was up 1.93 percent.

While almost all sectors of U.S. REITs have delivered double-digit gains year-to-date, some are outshining others. Health care was the industry’s top-performing major sector, with a 23.77 percent total return, according to the NAREIT report. Lodging was up 17.51 percent, and retail was up 17.34 percent, led by shopping centers.

An improving economy is clearly sending consumers back on vacation and back to the malls. Health care has been a consistent leader, as Baby Boomers fuel the aging population.

(Read More: Map: Tracking the US Real Estate Recovery)

A product of the real estate recovery, Mortgage REITs were up nearly 19 percent and Home Financing REITs were up over 17 percent. Commercial financing is driving much of the former, but these sectors are benefitting from a potential thaw in mortgage credit in residential as well.

“There are signs that conditions are beginning to loosen,” according to analysts at Capital Economics, who also noted that mortgage demand is on the rise.

Article source: http://www.cnbc.com/id/100734766