"Investors are buying homes, in part, to rent them out, and that has added a lot of rental supply, and that's preventing rents from rising," said Trulia economist Jed Kolko. "It means some investors will start to think about selling those single-family rentals."

Blackstone, the world's largest private-equity firm, has spent more than US$3.5 billion to buy 20,000 single-family rentals, while Colony Capital has raised US$2.2 billion. They rushed to buy houses after prices fell by a third from their July 2006 peak as more families opted to rent after failing to qualify for a mortgage or deciding not to own.

"Prices have increased off a very low base, and it's growing increasingly competitive, but we are still finding opportunities to buy," said Devin Peterson, a Blackstone real-estate associate. "We recognised that prices were moving faster than people expected. We'd rather be a few weeks behind in completing a rental process than missing out on a few points in home-price appreciation."

The firm last week expanded a credit line led by Deutsche Bank to US$2.1 billion from US$600 million to buy homes.

While large funds accounted for a small fraction of the almost 5 million homes sold last year, their buying spree had an impact on the market, said Kirk McGary, CEO of Real Property Management, a Utah-based rental company with franchises that manage US$5 billion worth of single-family homes.

"The institutional people have definitely changed the game," McGary said.

Investors flocked to Phoenix after home prices plunged 56 per cent from their June 2006 peak to a September 2011 low, according to the S&P/Case-Shiller index of home values. Last year, Phoenix rose the most in the 20-city index, making it harder for investors to find bargains and then profit from renting.

Prices paid by the largest buyers probably rose more than the broader market because they were competing to buy similar homes - typically three-bedroom houses built since 1990, said Oliver Chang, managing director of Sylvan Road Capital.

"They're effectively pushing prices up on each other," he said.

The median purchase price for a single-family home in Phoenix jumped 35 per cent to US$163,000 in January from a year earlier, according to a March 8 report from Arizona State University. Median rents on a per-square-foot basis, meanwhile, dropped 3 per cent last month from a year earlier after climbing 1.5 per cent in the 12 months through February 2012 and 3 per cent a year earlier, according to Fletcher Wilcox, a real estate analyst at Grand Canyon Title Agency in Phoenix.

Tina Africk, a Las Vegas broker who manages 60 home rentals, said houses that might have rented in 30 days in the past could now take 90 days to fill, while rents had dropped about US$100 a month from a year ago.

"The individual owners are going to feel the impact much more," Africk said. "For an institutional investor, US$100 here and there doesn't mean that much."

In Phoenix, competition among landlords was heating up as the flow of new renters who lost their homes to foreclosure had begun to slow, Wilcox said. Arizona, which had a relatively quick repossession process, had worked through many of its foreclosures, and distressed sales made up a shrinking portion of sales, Wilcox said.

"What we're seeing is a game of musical chairs," Wilcox said. "People lose homes to foreclosure and then rent a single-family home from an investor while another investor buys the foreclosure they just left."