NEW YORK CITY—In the past month, the single-family rental market has seen its 11th and 12th securitizations since the first one was issued last November, with the two newest offerings totaling about $1.3 billion. With yields rising on both the senior and junior portions of the issues, some experts are wondering whether it's too much, too fast for a still-young asset class.

Citing a note from Bank of America, Bloomberg reported this past Friday that yields on the riskiest portion of the securitizations climbed earlier this month to 5.3 percentage points over benchmark rates, from 4 percentage points in early August. Further, on the most recent securitization, a $528.4-million package from American Homes 4 Rent that priced this past Thursday, Bloomberg reported that “both the safest and riskiest of the securities pay a higher yield above the benchmark” than the Agoura Hills, CA-based REIT's previous deal in September. “The junior portion pays a 4 percentage point spread, compared with 3.6 percentage points two months ago.”

Jason Callan, head of structured products at Boston-based Columbia Management Investment Advisers LLC, told Bloomberg that supply of SFR bonds has increased ahead of demand. “It's a new market and you just don't have that many people signed on to fully participate,” Callan said, although his firm has invested in previous AH4R securitizations.

Callan's counterpart at Pasadena, CA-based Western Asset Management Co., Anup Agarwal, is taking a wait-and-see attitude on buying the securities. “I understand why it's a good business model from the sponsor's perspective,” he told Bloomberg. “But as a security holder, we don't see it as an attractive proposition.”

A Kroll Bond Ratings Agency presale report on the most recent securitization, AH4R 2014-SFR3, cites some of the challenges facing institutions amassing large-scale SFR portfolios, as well as the underlying safeguards in the business model. “Institutional ownership and management of SFR homes remains to be a new business model and continued availability of liquidity and capital for financing such businesses, especially in adverse economic and/or capital markets environments, is untested,” according to KBRA's report.

“As is often true with any new or esoteric asset class, dislocations in liquidity could impact such businesses more severely than more established businesses and asset classes.” On the other hand, the report notes that the loan amortizes, allowing for “natural deleveraging” across the term of the loan.

Furthermore, given the “customized nature” of the loan and the related collateral, “there may be a limited universe of buyers willing to purchase the loan in a distressed situation, and substantial workout negotiations may be required to restructure the loan,” according to KBRA's presale report. A foreclosure could prove “lengthy and costly,” because of “the geographic distribution of the large number of properties and the jurisdictions in which the homes are located.” Laws of individual states in which the collateral resides could hamper the special servicer in accelerating the loan, enforcing the equity pledges and fully realizing value following a default.

In a presale report on an SFR securitization by the Blackstone Group's Invitation Homes this past October, KBRA noted that “the need for local property knowledge and economies of scale in managing properties in a particular region can be viewed as a positive aspect of concentrating on a few regions.” Conversely, however, “the risk of being significantly impacted by a local downturn in the economy and/or property markets is elevated.”

On the other, KBRA noted that the 3,207 rental homes in the first Invitation Homes securitization last year renewed 64% of expired leases. Further, recent reports from Moody's Investors Service and Morningstar Credit Ratings LLC have found that rising home values and revenue growth that outpaced higher-than-anticipated expenses have represented tailwinds for institutional SFR players.

And as a measure of how young the sector still is, a report last month from Keefe Bruyette & Woods pointed out that however much investment activity SFR has seen from a handful of large-scale players such as AH4R, Invitation Homes and Starwood Waypoint Residential Trust, ownership remains highly fragmented. “We estimate major institutional players have now invested approximately $25 billion to acquire over 150,000 properties,” the report states. “Although significant, this amounts to 6% of distressed sales since 2012 and 7% of current seriously delinquent loans and foreclosures.”