Institutional investors purchased 67,943 US homes in Q2 2021, the highest amount on record.
Institutional Investors Big Players in Q2 2021
Institutional investors bought 67,943 US homes during Q2 2021, an increase of +15.1% q/q and a whopping increase of +106.7% y/y. Investor purchases of 67,943 homes represented 15.9% of all US homes purchased in Q2 2021, down just slightly from the 16.1% share of the investor purchases during Q1 2020.
These residential acquisitions translated into $48.4B of investor dollars in Q2 2021, up from $38.9B in Q1 2021 and up from $38.9B in all of 2020.
Soaring Home Prices Encouraging Investors to Participate in the Market
Sheharyar Bokhari, senior Economist with Redfin, said, “Investors see soaring home prices as an opportunity. With housing values consistently on the rise, solid returns are pretty much guaranteed – especially when you’re an investor who has access to extremely cheap debt.”
Bokhari continued, “Investors are also taking advantage of surging demand in the rental market. With so many Americans priced out of homeownership, investors can turn an easy profit by buying up properties and renting them out.”
What and Where Did Investors Buy in Q2 2021?
Investors purchased some 20%, one in five, lower-priced homes during Q2 2021. They also purchased 13.8% of mid-priced homes and 13.5% of high-priced homes, according to Redfin.
Single-family homes and condos caught the eye and dollars of institutional investors. They bought 16.1% of all single-family homes in Q2 2021 and 15.1% of all condos. Investors also bought 26.5% of multifamily properties sold during Q2 2021, substantially less than the 33.3% of all multifamily acquisitions in 2019.
Since investors are often all-cash buyers (74% of investor purchases were financed with cash in Q2), individual buyers, usually first-time buyers, needing mortgages were often left out in the cold.
The top markets for institutional investors during Q2 2021 included:
- Phoenix – 24.5% of homes sold
- Miami – 24.2% of homes sold
- Atlanta – 23.6% of homes sold
- Charlotte – 22.8% of homes sold
- Las Vegas – 22.8% of homes sold
Institutional Investment in Short-Term Rental Market “Just Around the Corner”
Richard Ford, co-founder of Roofstock, sees many parallels in the short-term rental market and the single-family rental market. Ford said, “I think it’s inevitable that (investors) will (enter the short-term rental market) …I see incredible parallels to the single-family rental space – the long-term rental space – a decade or so ago. It’s a big asset class which has yield associated with it in an environment where people are starving for yield.”
Of course, management and regulatory issues are different for long-term and short-term rental spaces but, according to Shaun Greer, vice president of sales and marketing with Vacasa, management strategies, prices and guest options will likely dictate supply and demand issues.
The bottom line as Ford with Roofstock sees it is that “…nobody really wants to stay at a Motel 6 anymore.”
Thanks to Inman.