Homes like this foreclosure in Gwinnett County, GA, are being bought up by institutional investors. Locals say they're being squeezed out of the housing market.

GWINNETT COUNTY, GEORGIA (Real Money) -- It’s a new phenomenon sweeping across the nation: big institutional investors buying up foreclosed homes by the hundreds – even thousands – in distressed communities. Even though the housing market is improving, a new Morgan Stanley report says homeowners who have defaulted on their mortgage will likely have no choice but to rent, and that will result in “moving the country towards a rentership society.” And that’s one of the big reasons why large investors are buying up so many houses so quickly. “Looking back a year and a half ago, not one institution owned more than 1,000 single family rental homes,” says David Bragg, Managing Director at Green Street Advisors. “However, today the top six players combined own 80,000 single family rental homes.”

What they’re doing is buying these homes in blocks to turn around, put on the rental market, and resell when the market really is strong.

And Morgan Stanley predicts that number will grow in the coming years. It says the now $17 billion market will balloon to $100 billion. “Hedgefunds across the country are realizing that our market is going from what they refer to as an owner nation, to a renter nation…so the rental market is huge,” says Sheree Villar, a local realtor with ERA Atlantic Realty in Gwinnett County, Georgia. She buys homes for two large institutional investors every month at the foreclosure auction from the steps of the Gwinnett County courthouse. “What they’re doing is buying these homes in blocks to turn around, put on the rental market, and resell when the market really is strong.“ The biggest institutional investor on the scene right now is Blackstone, which purchases residential houses under the name “Invitation Homes.” The other top two investors in the U.S. right now are American Homes 4 Rent and Colony American Homes. Many big investors are pooling some of these homes into Real Estate Investment Trusts - or REITS. These are popular vehicles for real estate and trade on the stock exchange. Investors may be counting on big returns, but local realtors say it’s changing the housing market in Gwinnett County. “In one month we advertised 1089 foreclosures, which is equal to the active listings in the market,” says Gwinnett county real estate broker David Hunt. “Hedgefunds are taking those off the market. They’re not available for anybody to buy. So we’re coming up with a shortage of housing.