Investor demand is stronger than ever while prices keep rising. Price jumps enable investors to hike rents and sell flipped house for more.
Investors Claimed 18.4% Market Share in Q4 2021
Real estate investors bought a record 18.4% of for-sale homes in the US during Q4 2021, according to Redfin. For comparative purposes, investors acquired17.4% of for-sale homes in Q3 2021 and during Q4 2020, investors claimed a market share of 12.6%.
Despite investor market share climbing to new heights in Q4 2021, the number of homes purchased by investors was down -9.1% from the Q3 2021 peak due to supply crunches. Still, investors bought 80,293 homes in Q4 2021, a year-over-year increase of +43.9%.
75.3% of investor home purchases were paid for with all cash in Q4 2021. In dollars, investors bought $49.4B worth of homes in Q4, up from $35B the year prior. The average price investors paid for a home was $432,971, an increase of +10% y/y.
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Investors Taking Advantage of Intense Rental Demand
As the nation’s housing market continues to experience sky-high home prices, up +15% y/y in December, and scant inventories, investors voraciously scoop up disappointed, priced-out wannabe buyers who become renters. Real estate investors leverage intense rental demand by increasing their rent prices, up +14% in December 2021, for a new lease.
“While record-high home prices are problematic for individual homebuyers, they’re one reason why investor demand is stronger than ever, ” said Redfin economist Sheharyar Bokhari. “Investors are chasing rising prices because rental payments are also skyrocketing, incentivizing investors who plan to rent out the homes they buy. The supply shortage is also an advantage for landlords, as many people who can’t find a home to buy are forced to rent instead. Plus, investors who “flip” homes see potential to turn a big profit as home prices soar.”
Bokhari continued. “Investors buying up a record share of for-sale homes is one factor making this market difficult for regular homebuyers. It’s tough to compete with all-cash offers, and rising mortgage rates have a smaller impact on investors because they often don’t use mortgages at all. If home-price growth slows in the coming year, investor demand may cool down because rental price growth will show too.”
Share of Investor Purchases by Price Tiers
Low-priced homes, a long-time mainstay of investor purchases, became a little less favored during Q4 2021. Low-priced home purchases represented just 37% of all investor purchases during Q4 2021, a record low and down from 44.5% from the year earlier.
Mid-priced homes became a bit more popular with investors last quarter. Mid-prices homes represented 32.3% of investor purchases in Q4 2021, up from 24.1% one year ago.
High-priced homes represented 30.7% of investor purchases during Q4 2021, slightly down from 31.4% the year before.
Bokhari said, “Lower price points are still popular with investors, and I don’t expect that to change…But investors are also increasingly interested in higher-priced properties, partly because there’s a lack of low-priced inventory and partly because they’re betting on rising demand for high-end rentals.”
Share of Investor Purchases by Housing Types
Investor purchases by housing type looked like this during Q4 2021:
– Single-family residential – 74.8%
– Condo/Co-op – 15.4%
– Townhouse – 6.0%
– Multi-Family – 3.8%
Where Investors Claimed Biggest Market Share in Q4 2021
The top three metros for investors included Atlanta (32.7% market share), Charlotte (32.1%), and Jacksonville (29.8%). Las Vegas (29.2%), and Phoenix (28.4%) followed not far behind.
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