Investor Home Purchases Surge for the First Time in Two Years
Consumers facing high housing prices often point to private equity as a contributing factor. However, experts suggest that while the housing market has multiple issues, determining whether real estate investor activity is truly deterring homeownership across the U.S. is challenging.
In the first quarter of 2024, real estate investors purchased about 44,000 U.S. homes, up 0.5% from a year ago, according to Redfin. This marks the first increase since Q2 2022. The data tracks investor activity, which includes people or entities buying properties to sell or rent without intending to live there themselves. In the first quarter of 2024, investors accounted for 19% of home purchases, implying that around 81% of homes are bought by individuals likely making them their primary residences.
Institutional operators, or real estate investors who own at least 1,000 single-family homes, own about 1% of the total U.S. housing stock, according to an analysis from ResiClub, based on data from Parcl Labs.
Gauging Investor Impact
A report from Moody’s Analytics examined the relationship between investors’ share of sales and homeownership rates on a metro-by-metro level. “It looks like there’s a pretty weak relationship between the two,” said Matthew Walsh, assistant director and economist at Moody’s Analytics, indicating that investors aren’t significantly crowding out traditional homebuyers.
In some areas, investors bought existing homes at high rates, sometimes representing up to a third of purchases. However, this doesn’t necessarily mean consumer homebuyers are being crowded out, according to Moody’s analysts. “Answering that question is really, really complicated,” said Redfin’s Zhao, noting that straightforward data analysis alone isn’t sufficient.
Part of the recent increase in real estate investor activity is due to seasonal factors, with more homes typically sold in spring, Walsh explained. Additionally, lower mortgage interest rates at the start of 2024, which later rose in April, also played a role.
Implications for Buyers and Renters
For consumers buying homes, competing against investors adds another layer of competition. Investors often rent out single-family homes, which can boost rental supply—a positive sign for renters, Zhao noted. Additionally, some investors buy uninhabitable properties, fix them, and add them back into the housing supply, ultimately benefiting the market.
“It’s very much a nuanced argument when you’re thinking about, what does investor activity mean for the housing market,” Zhao said. While investor purchases can present challenges for homebuyers, they also contribute positively by increasing rental supply and rehabilitating uninhabitable properties.
Understanding the full impact of investor activity on the housing market is complex and multifaceted. While it presents challenges for homebuyers, it also offers advantages for renters and the overall housing supply.