Investors Take Record High of Home Purchases

Get ready for more scares about investor purchases of homes. According to CoreLogic’s tally, their share in the last quarter of 2023 reached a new high of nearly 29% — 28% in October, 27.3% in November, and 28.7% in December. That’s more than the former record of 28.3% in February 2022.

As CRE has seen in the past, there’s a good chance that attention from activists and politicians will fall on the industry, claiming that giant investors are buying up ever more inventory. But there’s a different dynamic going on. First, many investors are likely small, including many individuals and families that purchase an extra property to turn into rentals.

Second, investor purchases have been trending down in absolute numbers since mid-2021. But nowhere near as quickly as non-investor purchases. As the total sales have dropped, the investor portion has grown larger as a percentage although trending lower in units bought per month.

Additionally, there were many inter-investor transactions during the period. “Investors are likely only making a small dent in homeownership numbers” because of the sales back and forth, CoreLogic says. “This number has ebbed and flowed from 16% to 19% over the past few years. Investors also make around 10% of their purchases on new homes and resell around 15% of their real estate portfolios. Given that investors buy around 900,000 homes per year, a loose calculation would put around 300,000 homes moving from owner-occupied to investor owners in a given year.” Not that 600,000 homes taken off the market for consumers is negligible, given that lack of inventory has become a significant factor in rising prices, which compounds the impact of higher mortgage rates and down payments people must clear.

CoreLogic says that 300,000 represents less than 0.5% of the total housing stock, so 600,000 would be a less than 1% portion of the total housing stock. Still, over time that is a significant number, approaching 12% a year.

Previous reporting by GlobeSt.com has found that large investors — again, far from all investors — aren’t bidding up prices. Instead, they go for lower-priced homes that might otherwise go to first-time buyers. The big advantage they have is the ability to pay cash, making for a more certain experience for the seller. The large buyer can then finance to pull cash out for more liquidity.

Also, the percentage of homes bought by flippers — parties that sell within six months of buying — has been dropping. The patterns have shown big ups and downs, but the trend is falling. In 2019 and early 2020, the highs surpassed 18% of purchases. That dropped to under 15% in mid-2020, back to nearly 18% in January 2021, with continued volatility and a downward trend line, the portion being about 12% in mid-2023.