Large investors retreat from housing market but smaller groups are still buying

Large investors retreat from housing market but smaller groups are still buying

Since 2021, investors of all sizes and stripes have made roughly one-quarter of all single-family purchases, according to CoreLogic Inc., an Irvine, California-based property data company. In July, August and September 2023, the share of single-family purchases made by investors was 26.8%, 27.2% and 28%, respectively.

CoreLogic economist Thom Malone said preliminary estimates suggest similar figures for the final three months of the year — with one notable difference: Larger investors are buying fewer homes now while small investors are still buying.

Mega and large investors — defined as those that own 1,000-plus or 100 to 999 properties, respectively — each purchased between 8,000 and 10,000 single-family homes per month throughout 2023, according to CoreLogic.

Malone said one reason why larger investors collectively are purchasing fewer homes is the pullback of iBuyers from the broader housing market.

In August 2021, iBuyers made about 9,000 purchases nationally. That number had fallen to about 1,000 per month by late last year, Malone said. “That’s just a harder business model to maintain when prices aren’t (rising as much)”.

Malone said it needs to be studied more closely why smaller investors have been able to maintain their share while other sized groups have pulled back, but anecdotally, he said because the minimum number of properties a small investor has to own is, by CoreLogic’s measurement, three, there’s been a notable increase lately in buyers purchasing a third property.

“A lot of people are locked in to such low (mortgage) rates that when they’re moving, rather than selling their old home, they’re instead deciding to rent that out,” Malone said.

And with affordability still being a major challenge for households across the U.S., that’s going to drive more people to the rental market, which which creates an incentive for investors to add rental properties, Malone said.

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