Rising Investor Purchases in U.S. Housing Market
In recent months, a significant trend has emerged in the U.S. housing market: a growing number of homes are being purchased by investors. This shift is occurring as rising prices and high borrowing costs push many traditional homebuyers out of the market.
Data shows that nearly 27% of all homes sold during the first quarter of the year were bought by investors. This marks the highest percentage we’ve seen in five years, according to findings from BatchData, a real estate data company. From 2020 to 2023, investors typically purchased about 18.5% of homes.
In tangible numbers, investors acquired around 265,000 homes between January and March, which is a slight increase of 1.2% compared to the previous year. This uptick demonstrates that while there is growth in investor purchases, it primarily reflects the challenges faced by regular buyers who are struggling with affordability issues.
Since early 2022, the housing market has experienced a downturn as mortgage rates began to climb from their pandemic lows. Last year, home sales reached their lowest point in nearly 30 years and have continued to remain sluggish into 2023. Many prospective buyers have been deterred by high mortgage rates and rising home prices, which, although increasing at a slower pace, still present a hurdle.
As home sales slow down, properties are taking longer to sell, leading to a larger inventory of homes available on the market. This situation is generally favorable for investors and other buyers who can afford to pay in cash, bypassing current mortgage rates.
The report highlighted that as traditional buyers face challenges, investors who have cash or better financing options are stepping in to keep transaction volumes steady. BatchData’s analysis indicates that investors often include vacation homes and rental properties in their purchases, excluding primary residences.
In total, investors bought about 1.2 million homes in 2024, which is slightly up from the previous average of 1.1 million from 2020 onwards. However, investor-owned homes still make up around 20% of the nation’s 86 million single-family homes. Notably, small-scale investors, owning between one and five homes, represent 85% of these properties, while larger investors with more homes own just a small fraction.
Interestingly, signs suggest that larger institutional investors may be pulling back on their home purchases. Data reveals that out of eight major firms leasing single-family homes, six sold more properties in the second quarter than they bought.
This ongoing dynamic in the housing market reveals the challenges and opportunities facing both investors and potential homeowners. As the landscape evolves, it remains to be seen how these trends will impact access to housing in the future.
