Investor activity peaked to new highs in summer 2021

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Investors took a break when the pandemic struck, pulling their investments across the board. But now that the pandemic is fading, investors are back in the market and showing up in record numbers.

According to new research from Realtor.com, home purchases by investors increased 59% year-on-year from 2020 and are also up 21% from 2019. Nationally, investor activity was an annual record of 5. 7% of all home purchases, but 4.5% of home sales, meaning investors were grabbing properties at a faster rate than they were selling them, putting them at odds with the housing seekers.

The analysis also found that this trend is having a negative impact on housing supply since homes are not being sold at the same rate they are being bought.

According to the author of the report Sabrina speianu, Senior Economic Research Analyst at Realtor.com, the market could be at a turning point this fall as current supply chain issues plague the home turnaround industry – as materials become harder to come by, prices increase, which means that the house flip becomes less profitable. The inventory crisis is also hampering the ability of the fins to bring home to market in a timely manner.

“Over the next year, the opportunities for buy and hold investors may also be slightly more limited. While mortgage rates are expected to rise over the next year, relieving some demand pressures in the housing market, the lack of housing supply and low levels of new home construction continue to support steady price growth. Speianu said in the report. “Finding a good deal could become more and more difficult over the next few months and we could see investor interest slowing down. In the meantime, rental growth is promising, with technology markets growing again and the growing inaccessibility of homes for sale likely pushing back some consumer buying plans, thus increasing rental demand. This could mean that investors who have bought in the past year can expect a steady and growing income stream over the next year. “

Since the start of the pandemic, investor buying has declined significantly, but investors have started to return to the market from March and April. To put that into perspective, investors in July 2021 were buying 21% more homes than before the 2019 outbreak.

“Investor purchases continued to increase throughout the summer, which meant homebuyers faced increasing competition,” Speianu continued. “Until last October, investors had contributed positively to the housing stock, selling homes at a faster rate than they were buying for 11 consecutive months during the pre-pandemic and prior period. In April, investors returned to the market, buying about 2,700 more properties than they sold, a negative net contribution not seen since late 2015. In July, investors bought 5,300 more homes than they sold. ‘they didn’t sell any, which resulted in the biggest gap in our data since 2001.

Breaking down the data for the top 50 metropolitan areas, investors are not buying properties at the same rate across the board. In metro areas of Atlanta, San Francisco, Dallas, Los Angeles, and Riverside, Calif., Investors were selling homes at a faster rate than they were buying them in July, meaning investors potentially positively contribute to stocks.

On the other hand, buyers from Miami, Florida; Charlotte, North Carolina; Phoenix, Arizona; Tampa, Florida; and Jacksonville, Florida are areas where investors are buying homes faster than they are selling them, putting them at odds with the average buyer.

“The top 10 metropolises where investors buy more than they sell have an average population of 4.8 million, compared to an average population of 5.4 million in metropolitan areas where investors currently sell more than they buy,” wrote Speianu. “The subways where investors buy the most tend to have more active listings relative to the total housing stock, with the most buying subways having 4.9 units available per 1,000 households in July, while the best-selling subways don’t had only 4.0 dwellings available per 1,000 households. . The July 2021 listing price in subways where investors buy more was $ 392,000, on average, compared to $ 672,000 for subways where investors sell more.

“Rental growth rates in markets where investors buy more tend to be higher, on average, growing 15.3% year-on-year in July 2021, compared to 12.4% in markets where investors sell more. The price-to-rent ratio, one of the many measures used by investors to determine potential return and profitability, is also generally lower in investor-buy markets than in investor-sell markets, which means that prices houses are not considerably more expensive than rents and buying investors can expect better returns over the price of the houses they buy.

Data for the report was gleaned from records dating back to 2000 nationally and in the top 50 metropolitan areas. The report only included single-family homes, condos, townhouses, and townhouses, but excluded multi-family buildings which are not a market in which the typical buyer competes. For the purposes of the report, an investor has been defined as a buyer or seller who is an absent owner registered under a company name.

Click here to view a full copy of the report, including blackouts for the top 50 metropolitan areas.


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