As traditional homebuyers increasingly struggle with affordability, investors are becoming a larger and larger segment of the U.S. housing market. According to the latest available national data, homes owned by investor-owners account for nearly 20 percent of the nation’s 86 million single-family homes. This changing tide is further evidence of the shifting trends that are reshaping the real estate arena.
From 2020 to 2023, investors bought a higher average share—18.5 percent—of all homes sold. As of the first quarter of this year, investors accounted for almost 27% of all homes sold. In this January-March 2021 period, investors purchased a whopping 265,000 single-family homes. This is a slight improvement over Q3 of last year, which saw an increase of just 1.2%. So far in 2024, investors have creamed about 1.2 million homes. This recent surge is more than double the conventional trend of roughly 1.1 million annual home sales since 2020.
In fact, large institutional investors—such as Invitation Homes and American Homes 4 Rent—hold only 2.2% of these investor-owned properties. In reality, the bulk of these homes are owned by smaller players. About 85% of these properties are owned by the so-called mom-and-pop investors that own one to five homes. In addition, the marginal player—those that own six to 10 homes—account for another 5% of the overall investor-owned residential sector.
From inflation to high mortgage rates, there’s no denying that these issues are impacting the housing market. Too many would-be homebuyers are being disheartened in the process. Since the beginning of 2022, the U.S. housing market has been reeling from a housing sales crash. This drop corresponds to a sharp rise in mortgage rates from their pandemic-era lows. Consequently, home sales cratered to their lowest level in almost three decades last year.
These hurdles haven’t stopped the growing investor presence from keeping transaction volume afloat. The report highlights this trend, stating, “As traditional buyers struggle with affordability, investors with cash and financing advantages are stepping in to maintain transaction volume.”
Ironically, some of the biggest players in the single-family rental industry are actually selling more properties than they’re purchasing. Together, this trend represents a dramatic sea-change in the big banks’ business models. In fact, only six large, national firms bought fewer homes than they sold during the second quarter. This change in approach is indicative of their ability to respond to changing and unpredictable market conditions.
Home prices continue to increase, but at a much slower rate. Unfortunately, this leaves many hopeful buyers on the sidelines, while investors continue to operate in the real estate financial ecosystem with much less friction. The current data illustrates how investors are increasingly filling the gap left by traditional buyers in a challenging housing market.
