Real estate investors are increasingly dominating the US housing market, acquiring a larger portion of available homes.
This trend comes as traditional homebuyers are struggling to afford property amid rising prices and stubbornly high borrowing costs.
Investor activity in realty market
In the first three months of this year, nearly 27 per cent of all homes sold were purchased by investors, marking the highest share in at least five years, according to data compiled by BatchData.
This is a significant jump compared to the average of 18.5 per cent between 2020 and 2023.
The investors bought 265,000 homes in the January-March quarter, a 1.2 per cent increase from the same period a year earlier, AP reported.
What does this mean for housing market?
Even though the annual increase in investor purchases is modest, the rise in their share largely reflects the overall slowdown of the US housing market as traditional buyers face growing affordability constraints.
Last year, home sales fell to their lowest level in nearly 30 years and they have remained sluggish so far this year.
The main cause is that many potential homebuyers have been discouraged by increasing mortgage rates and constantly rising home prices, although it’s slow, the news agency reported.
How slowed home sales benefit investors
This slowdown in home sales resulted in properties taking longer to sell and a sharp rise in inventory of homes on the market.
This trend is benefitting investors and other home shoppers who can bypass high mortgage rates by paying in cash or tapping home equity gains, the report said.
As per BatchData, investors bought 1.2 million homes in 2024, a rise from an average of 1.1 million homes a year back in 2020, AP reported.
BatchData’s analysis, which includes vacation homes or rentals, but not a homebuyer’s primary residence, says that despite the shift, investor-owned homes account for only 20 per cent of the nation’s 86 million single-family homes.
Investor profile: Mostly mom-and-pop
A point to note is that the vast majority of investor-owned properties are held by “mom-and-pop” investors, defined as those who own between 1 and 5 homes.
They account for 85 per cent of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5 per cent.
Institutional investors that own 1,000 or more homes account for only about 2.2 per cent of all investor-owned homes, the news agency reported.
However, that number could get smaller as there are signs that large institutional investors are scaling back home acquisitions.