The hot new real estate investment trend -- buying single-family foreclosures, renovating and then renting them -- is still rolling along, as investors snap up big swaths of homes in many of the areas hard-hit by the foreclosure crisis. But, even as new companies are created to take advantage of this boom, and current players search farther afield for bargains, there are signs that this new business opportunity may be playing itself out.

The investment-to-REIT model is alive and well
Before the very end of last year, those involved in the single-family purchase and rental business were largely private equity groups like the Blackstone Group(NYSE:BX), Colony Financial (NYSE:CLNY), and Oaktree Capital(NYSE:OAK), which bought up distressed properties by the truckload.

While these companies are still heavily involved, there is also a new presence on the scene: the single-family home REIT. Last December, mortgage REIT Two Harbors (NYSE:TWO) spun off Silver Bay Realty (NYSE:SBY) after selling its stable of 3,100 homes to Silver Bay prior to its initial public offering. Around the same time, Altisource Residential was also born, spun off from Altisource Portfolio Solutions(NASDAQ:ASPS).

For a while, these two REITs were alone in the single-family world, but that seems to be coming to an end. The newest entry is American Residential Properties, which went public earlier this week.

Other companies are currently mulling single-family REIT IPOs, too. Colony recently announced that it plans to spin off its Colony American Homes, which owns over 9,500 homes with average monthly rents of $1,277. Barry Sternlicht, CEO of commercial mortgage investment REIT Starwood Property Trust (NYSE:STWD) has also said that he is seriously considering spinning off his company's real estate holdings into a single-family REIT within the next few months.

Saturation point?
All this enthusiasm may be backfiring. Investors have found themselves in saturated markets of their own making, where prices are rising, homes are becoming scarce, and rents are dropping. Areas where investor groups have been especially active -- and where foreclosures used to be abundant -- are reporting declining rents over just the past year. Previously devastated cities like Las Vegas, Fort Lauderdale, and Chicago have seen rents fall the most, according to an economist from Trulia.

Can institutional investors continue to acquire the properties needed to keep up with the growth rate of the single-family rental business? This is becoming less clear -- as is what will happen to the housing market when these entities decide that enough is enough. From the looks of things, this may happen sooner, rather than later.