It’s looking as if last year’s single-family investor buying splurge may become routine going forward.
Investors Resumed Buying Spree of Single-Family Homes in Q1 2022
According to CoreLogic, investors stocked up on single-family homes in Q1 2022. Take a look:
- In January 2022, investors made 26.6% of all single-family home purchases, up from 21.8% in Q4 2021.
- In February 2022, investors represented 28.1% of all single-family home purchases, a record high according to CoreLogic’s data that goes back to 2011.
- In March 2022, investors acquired 27.9% of all single-family home purchases.
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CoreLogic believes that this current level of investor acquisitions of single-family homes is “…the clearest signal yet that investors may have changed their behavior (and acquisition preferences) permanently.”
Single-Family Purchases by Investor Classes in Q1 2022
As with everything else, there are designated investor classes that help define investor activity.
- Small investors – those who own fewer than 10 properties – represented nearly half, 48%, of all investor purchases during Q1 2022.
- Medium investors – those who own between 11 and 100 properties – accounted for 31% of investor properties in Q1 2022.
- Large investors – investors with 101 to 1,000 properties – represented 9% of single-family home purchases during Q1 2022.
- Mega investors – those with over 1,000 properties – represented 12% of all single-family home purchases in Q1 2022.
Mega investors are the most fluid among this group of investor classes. Why? Because this mega cohort fluctuates in sync with the share of single-family housing market fluctuations. For example, as the investor share in the single-family market increased 6% from January to July 2021, the percentage of mega investors grew from 7% to 18%.
CoreLogic anticipates that this mega investor class will increase its share of investment property in Q2 2022.
Investor Purchase Preferences Constant
Investors, regardless of their class, tend to prefer purchasing single-family homes in cheaper, more affordable parts of the country and price tiers.
According to CoreLogic, investors purchased about 33% of home purchases in the bottom tier of Metropolitan Statistical Areas or MSAs in Q1 2022.
(The US Office of Management and Budget defines an MSA as a “…standardized county or equivalent-based areas having at least one urbanized area of 50,000 or more population, plus adjacent territory that has a high degree of social and economic integration with the core, as measured by commuting times.”
Clearly, single-family investors are direct competition for most first-time home buyers who also tend to prefer buying in low tier, more affordable MSAs.
Highes 10 Investor Shares by MSA, Q1 2022
Investors, based on the highest investor shares by MSA, zeroed in on warm weather states that also had high growth potential in terms of both population and home price. Take a look:
- Atlanta-Sandy Springs-Roswell GA – +42.5%
- San Jose – Sunnyvale-Santa Clara – +40.5%
- Los Angeles- Long Beach – Anaheim CA – +40.0%
- Memphis TN-MS-AR – +39%
- Las Vegas – Henderson-Paradise NV – +38%
- Phoenix-Mesa-Scottsdale AZ – 37.8%
- San Antonio- New Braunfels TX – +35%
- El Paso TX – 35%
- Dallas-Fort Worth-Arlington TX – +35%
- Charlotte-Concord-Gastonia NC-SC – +35%
- San Diego-Carlsbad CA – +35%
Impact of Rising Interest Rates on Investors in Q2 & Q3 2022?
Will investors continue to play such a large role in single-family home purchases as interest rates continue rising?
Some industry experts say that investors are not particularly impacted by climbing interest rates because investors tend to be cash buyers. Others say that investors are impacted by rising rates because they tend to make investment decisions based on comparable returns with other instruments such as stocks or bonds.
Either way, we’ll know soon enough as we study Q2 and Q3 market data from CoreLogic and other real estate data firms.
Thanks to CoreLogic.
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