Real Estate Investors Are Buying a Record Share of U.S. Homes
Investors bought 18.4% of the U.S. homes that were purchased in the fourth quarter, worth a total of nearly $50 billion
SEATTLE--Wednesday, February 16, 2022--(BUSINESS WIRE)--(NASDAQ: RDFN) — Real estate investors bought a record 18.4% of the homes that were sold in the U.S. during the fourth quarter of 2021, according to a new report from Redfin (www.redfin.com), the technology-powered real estate brokerage. That’s up from 12.6% a year earlier and a revised rate of 17.4% in the third quarter.
Although investor market share hit a record in the fourth quarter, the number of homes bought by investors declined 9.1% from the third-quarter peak–but it’s up significantly from pre-pandemic levels. Investors bought 80,293 homes in the fourth quarter, up 43.9% from a year earlier. The housing-supply crunch constrained home sales for all homebuyers, including investors. The drop from the third quarter is also due partly to seasonality.
The number of homes bought by investors jumped throughout 2021 as home prices rose rapidly–they were up 15% year over year in December–alongside a shortage of homes for sale. Investors are taking advantage of intense demand for rentals and increasing prices, with the average monthly rental payment for a new lease up 14% in December.
Just over three-quarters (75.3%) of investor home purchases were paid for with all cash in the fourth quarter.
“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.”
“Investors buying up a record share of for-sale homes is one factor making this market difficult for regular homebuyers,” Bokhari continued. “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 slow, too.”
In dollar terms, investors bought $49.9 billion worth of homes in the fourth quarter, up from $35 billion a year earlier. The typical home investors purchased sold for $432,971, up nearly 10% from a year earlier.
Redfin media release continues in the We Get Around Network Forum (www.WGANForum.com)