In our everyday discussions with real estate agents, there seems to be a cold war between deep-pocket real estate investors and buyers. The idea is that buyers can’t compete with investors who are usurping homes with all-cash offers, leaving little inventory behind. A closer look at some data suggests that’s not always the case.
While real estate investors are purchasing homes rapidly — investor purchases of homes are up 103% year-over-year in April 2021 — they’re also contributing inventory in big metros.
In roughly 19 markets – including Atlanta, Dallas, Baltimore, Los Angeles and San Francisco – investors are actually helping to replenish the number of homes for sale, according to a Realtor.com report. These are markets where they’re selling more than they’re buying.
Investors added to inventory in these large metros
- Atlanta +399 homes
- Los Angeles+112
- San Francisco+93
- Washington D.C.+84
Cities where investors are gobbling up homes
But, not all cities are seeing an influx of real estate investor homes in its inventory. Cities such as Phoenix, Miami, Tampa, Charlotte and even Chicago, see investors buying more than they are selling. The top 10 metros where investors are buying more than selling have an average population of 4.2 million, compared to an average population of 5.5 million in metros where investors are currently selling more than buying. The metros where investors are buying more tend to have more active listings relative to the total housing stock, with top buying metros having 3.7 homes available for every 1,000 households this April, while the top-selling metros only have 3.0 homes available for every 1,000 households, according to an investor report.
Investor purchases on the rise
Investor purchases are on the rise, nationally. Investors bought 5.7% of homes sold in April and sold just 5.0%, competing with non-investor buyers. During that month, those investors raided the market, buying approximately 2,700 properties. This has caused a negative net contribution not seen since 2015.
It wasn’t always like this.
Until last October, investors were selling homes at a faster rate than they were purchasing for 11 straight months during the pre-and earlier pandemic period.
Will it get better for homebuyers? That depends on when it is a good time to sell. Some 64% of respondents said it’s a bad time to buy a home, while 77% said it’s a good time to sell, according to a Fannie Mae survey. Investors are likely to hold on to their assets longer if home prices and rental rates don’t drop significantly.
Interest rates are projected to increase over the year, historically-low inventory and continuing low levels of new construction are expected to support home prices even while price growth slows. The expiration of the moratorium on evictions could create more rental vacancy, as rental price growth continues to increase.
This could mean investors wait longer before they’re willing to sell, provoking anxious homebuyers and frustrated real estate professionals.