- Investor purchases of homes were up 59% year-over-year in July 2021, and up 21% over the same time period in 2019.
- Nationally, investor activity accounted for 5.7% of home purchases and 4.5% of home sales in July meaning that on net they were buying more than selling and competing with homebuyers nationwide. The investor share of home purchases is the highest of this time of year in our records.
- The top markets where homebuyers are facing competition from investors include Miami, Charlotte and Phoenix.
This past summer we reported that investors had sprung back into the residential real estate market in earnest in Spring 2021, growing their share of home purchases for the first time since the onset of the COVID-19 pandemic. An analysis of more recent sales data reveals that this trend didn’t let up throughout the summer as investors increased their purchasing activity to the highest share of home sales in our records for this time of year. Meanwhile, investor selling activity didn’t grow as much, leading to a negative impact on housing inventory as homebuyers increasingly found themselves competing with investors while fewer sellers listed homes.
This fall, the market may once again be at a turning point. While this report narrows the scope of data to measure the activity of buy-and-hold investors more directly in competition with homebuyers, it should be noted that home flipping has become increasingly less fruitful with profit margins shrinking and supply chain uncertainty adding to both the cost and time to renovate. This also has inventory implications as flippers are less able to bring their renovated flips to market, meaning fewer homes for buyers in an already-limited inventory environment.
Over the next year, opportunities for buy-and-hold investors may also be slightly more limited. While mortgage rates are expected to increase over the next year, relieving some demand pressures in the housing market, a lack of supply of homes and low new home construction levels continue to support steady price growth. Finding a bargain may become increasingly difficult over the coming months and we may see investor interest slow. In the meantime, rental growth has a strong outlook, with tech markets once again commanding growth and increasing unaffordability of homes for sale likely pushing back some consumer plans to purchase, thereby elevating rental demand. This could mean that investors who bought over this past year can look forward to a stable and growing revenue stream over the next year.
Investor Share of Home Sales Reaches New Highs
Investor purchases of homes rose for the first time in March and April of this year after 11 months of year-over-year declines. In July, investor purchases rose 59% over the previous year. While this was a high growth rate, it decelerated from a peak of 126% growth in May. Some of this increase is due to investors’ about-face in the wake of the pandemic, purchasing a lot this year in comparison to last year when uncertainty drove them to put buying on hold. Notably however, investor purchases also increased above pre-pandemic levels, growing by 21% over July 2019, indicating that homebuyers faced more than typical competition from investors during the 2021 summer homebuying season.
The investor share of homes purchased also grew for the first time in 12 months by 0.3 percentage points in March. By July, growth accelerated as the investor share of home sales grew by 2.0 percentage points year-over-year to a share of 5.7%. This was the highest level for the month of July from our records dating back to at least 2015.
Investor purchases continued to rise throughout the summer meaning that homebuyers faced increasing competition. Up until last October, investors had been positively contributing to housing inventory, by selling homes at a greater rate than they were purchasing for 11 months in a row during the pre- and earlier pandemic period. In April, investors sprung back into the market, buying up approximately 2,700 properties more than they sold off, a negative net contribution not seen since late 2015. By July, investors purchased 5,300 more homes than they sold, leading to the largest gap in our data since 2001.
While the national trend is pointing to investors contributing to the inventory crunch for homebuyers, this is not the case for all metros across the country. While this list is smaller than what we reported in the springtime, in markets such as Atlanta, San Francisco, Dallas, Los Angeles and Riverside, investors were selling homes at a greater rate than they are buying them as of July 2021. In these markets, investors are positively contributing to inventory. Meanwhile, in Miami, Charlotte, Phoenix, Tampa and Jacksonville, among many others, investors are buying more than they are selling and are in greater competition with homebuyers. Among the nation’s 50 largest metros, investors were buying more than selling in 37 of the largest 50 metros in July, up from 31 markets measured in April.
In general, metros where investors are buying more than selling tend to be smaller than those where investors are selling more than buying, and they also have more available inventory, a lower median home listing price, higher rent growth, and lower price to rent ratios.
The top 10 metros where investors are buying more than selling have an average population of 4.8 million, compared to an average population of 5.4 million in metros where investors are currently selling more than buying. The metros where investors are buying more tend to have more active listings relative to the total housing stock, with top buying metros having 4.9 homes available for every 1000 households this July, while the top selling metros only had 4.0 homes available for every 1000 households. The July 2021 listing price in metros where investors are buying more was $392,000, on average, compared to $672,000 for metros where investors are selling more. Rent growth rates in markets where investors are buying more tend to be higher, on average, growing by 15.3% year-over-year in July 2021 compared to 12.4% in markets where investors are selling more. The price-to-rent ratio, one of several metrics investors use to determine potential return and profitability, is also generally lower in investor-buyer markets compared to investor-seller markets, meaning that home prices aren’t drastically more expensive than rents and investor buyers can expect better returns relative to the price of the homes they are buying.
Listing price growth is also larger in the investor-buyer markets, where listing prices grew by 8.6% in July on average, compared to a growth of just 7.1% for investor-seller markets. The inventory in markets where investors are still buying more than selling is also declining more rapidly even though there are generally more listings available per existing household (-37% inventory decline year-over-year compared to -23% for seller markets in July 2021).
Looking only at the purchase side of the transaction, investors were buying the biggest share of homes in Memphis, Birmingham, St. Louis, Charlotte and Jacksonville, among others. Viewing metros with this lens, we can see that buyers faced competitive pressure from investors in a wide variety of markets. However, three markets where investors were active home buyers didn’t make the top 10 list of markets where investors detracted from inventory most. In these markets (Birmingham, Memphis and Oklahoma), investor selling activity was also elevated, which muted the net impact of higher levels of buying in these areas as well. In other words, in these areas, buyers looking to buy a home of their own were competing with investors, but may also have benefited from being able to buy a home from an investor-seller, too.
July 2021 Statistics by Metro
|Metro||Investor Net Contribution to Inventory (Number of Homes)||Investor Buyer Share of Sales||Median Listing Price||Median Listing Price Growth Y/Y||Median Rental Rate Y/Y||Price to Rent Ratio||Inventory per 1000 HH||Inventory Y/Y|
|Atlanta-Sandy Springs-Roswell, Ga.||458||3.9%||$400,000||14.2%||18.5%||20.2||7.6||-41.3%|
|Austin-Round Rock, Texas||3||4.0%||$536,000||36.6%||14.8%||28.8||3.6||-44.0%|
|Buffalo-Cheektowaga-Niagara Falls, N.Y.||-13||3.9%||$240,000||-1.0%||7.4%||16.9||2.3||-14.8%|
|Dallas-Fort Worth-Arlington, Texas||80||4.8%||$395,000||9.8%||13.6%||23.2||3.0||-47.4%|
|Hartford-West Hartford-East Hartford, Conn.||-2||1.1%||$340,000||13.7%||7.7%||18.3||3.9||-59.8%|
|Houston-The Woodlands-Sugar Land, Texas||51||3.7%||$365,000||11.4%||7.9%||23.5||6.0||-34.4%|
|Kansas City, Mo.-Kan.||-1||4.9%||$330,000||-6.0%||7.6%||23.9||3.5||-17.2%|
|Las Vegas-Henderson-Paradise, Nev.||-166||9.7%||$410,000||20.6%||19.7%||23.5||6.0||-39.0%|
|Los Angeles-Long Beach-Anaheim, Calif.||71||4.8%||$999,000||0.5%||6.7%||30.4||3.2||-19.3%|
|Louisville/Jefferson County, Ky.-Ind.||-101||10.2%||$270,000||-6.9%||8.9%||21.7||3.4||-19.3%|
|Miami-Fort Lauderdale-West Palm Beach, Fla.||-428||11.0%||$450,000||11.5%||20.7%||16.3||9.2||-48.1%|
|Milwaukee-Waukesha-West Allis, Wis.||-4||4.3%||$290,000||-20.0%||3.8%||17.2||2.8||0.3%|
|Minneapolis-St. Paul-Bloomington, Minn.-Wis.||-62||4.1%||$365,000||-0.6%||2.7%||20.3||4.7||-22.9%|
|New Orleans-Metairie, La.||-60||9.4%||$341,000||8.3%||3.1%||21.2||5.2||-21.7%|
|New York-Newark-Jersey City, N.Y.-N.J.-Pa.||-151||5.0%||$599,000||0.8%||-6.1%||20.6||8.8||-12.9%|
|Oklahoma City, Okla.||-29||11.2%||$285,000||0.4%||6.8%||27.7||3.7||-40.9%|
|Riverside-San Bernardino-Ontario, Calif.||55||3.3%||$540,000||20.0%||29.7%||20.2||4.7||-13.6%|
|San Antonio-New Braunfels, Texas||-30||4.6%||$338,000||7.1%||9.0%||24.5||4.4||-44.9%|
|San Diego-Carlsbad, Calif.||34||4.7%||$830,000||4.7%||21.7%||26.5||3.5||-0.2%|
|San Francisco-Oakland-Hayward, Calif.||98||2.7%||$1,000,000||-4.8%||-2.9%||29.1||2.4||-20.6%|
|San Jose-Sunnyvale-Santa Clara, Calif.||28||2.2%||$1,250,000||2.7%||1.4%||35.5||2.0||-17.4%|
|St. Louis, Mo.-Ill.||-207||14.4%||$250,000||-0.7%||7.4%||18.0||4.2||-20.2%|
|Tampa-St. Petersburg-Clearwater, Fla.||-357||12.2%||$350,000||17.5%||27.2%||17.2||3.5||-47.7%|
|Virginia Beach-Norfolk-Newport News, Va.-N.C.||-40||4.2%||$315,000||-5.3%||11.9%||19.7||6.3||-32.3%|
|Washington-Arlington-Alexandria, DC-Va.-Md.-W. Va.||1||3.0%||$515,000||-2.8%||3.3%||21.2||4.2||10.8%|
In this analysis we examined deed records dating from January 2000 to July 2021 nationally and in the 50 largest metro areas. We included only single family homes, condos, townhomes and rowhomes and we excluded multi-family buildings which is not a market the typical homebuyer is competitive in. We attempt to capture business-oriented, buy and hold investor purchases, excluding buyers with an established flipping oriented business model. Some flipping activity is likely included as it is not always clear up-front whether an investor purchase is intended for a flip or buy-and-hold. We define an investor as a buyer or seller that was/is an absentee-owner and that has a name which includes the following: LLP, LP, LLC, GP, or TRUST. In addition to this broad definition, we also exclude keywords and sale types relating to home builders, relocation service companies, government bodies and financial institutions. Data limitations mean that this analysis excludes small investors not registered under a company name. Census estimates show that in 2018 41.2% of rental units were owned by individual investors while 47.5% of units were owned by Trustees, LLP, LP, or LLC, General Partnership, Real Estate Investment Trust, or Real Estate Corporation. Ownership entity for more than half of the remaining units was not reported.
Are you interested to learn more about the Greater Princeton, New Jersey Market Conditions, feel free to contact me at 609-915-9665.
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