Homes bought by investors made up a record 18.4 percent of the total homes sold in the United States during the final quarter of last year, based on a report by realty company Redfin, drawing scrutiny from lawmakers who have blamed the trend for driving up home prices.
The Q4 numbers reveal an uptrend from 12.6 percent in 2020 and 17.4 percent in Q3 2021. Investors purchased 80,293 homes in Q4, which is up 43.9 percent compared to the same period last year. However, the total number of homes purchased by investors in Q4 fell 9.1 percent from Q3’s peak. Housing supply crunches and seasonal factors are the two reasons given by Redfin for the quarterly drop.
“The number of homes bought by investors jumped throughout 2021 as home prices rose rapidly—they were up 15 percent year over year in December—alongside a shortage of homes for sale,” according to the Feb. 16 news release.
“Investors are chasing rising prices because rental payments are also skyrocketing, incentivizing investors who plan to rent out the homes they buy,” Redfin economist Sheharyar Bokhari said in the report. “The supply shortage is also an advantage for landlords, as many people who can’t find a home to buy are forced to rent instead. Plus, investors who ‘flip’ homes see potential to turn a big profit as home prices soar.”
There has been a surge of rental interest in the market, with the average monthly rental payment for a new lease up 14 percent in December.
Investors brought $49.9 billion worth of homes during the last quarter 2021, up 43 percent from $35 billion in Q4 2020. The average price of homes bought by investors was $432,941, which is approximately 10 percent higher than in 2020.
Around 32.3 percent of investor home buying was accounted for by mid-priced homes, up from 24.1 percent last year. The share of low-priced homes was at 37 percent, down from 44.5 percent, while high-priced properties made up 30.7 percent of total home purchases, which is slightly less than 31.4 percent in the last quarter of 2020.
Three-quarters of the investment went into single-family homes, with condos and coops making up 15.4 percent, townhouses accounting for 6 percent, and multifamily properties at 3.8 percent. Atlanta, Charlotte, and Jacksonville were places that saw the highest investor home buying as a percentage of total home sales.
The purchase of homes by investors is making things “difficult” for regular home-buyers, Bokhari said.
“It’s tough to compete with all-cash offers, and rising mortgage rates have a smaller impact on investors because they often don’t use mortgages at all. If home-price growth slows in the coming year, investor demand may cool down because rental price growth will slow, too,” he added.
The rising share of investor purchases among home sales has attracted scrutiny from lawmakers.
Senator Sherrod Brown (D-Ohio) blamed broadly “corporate America” for pushing housing prices “out of control” during a hearing of the Senate Committee on Banking, Housing, and Urban Affairs on Feb. 10. Across the country, the cost of housing is increasing, putting financial strain on families, he stated.