Almost one in every five U.S. homes sold in the third quarter of 2021 was purchased by an investor entity, rather than an individual looking to live in or rent out the residence, according to data from Redfin, a real estate brokerage.
Investors bought more than 90,000 houses totaling more than $63 billion, representing 18 percent of all homes sold in the quarter. The numbers all broke records in Redfin data reaching back to 2000.
“Increasing home prices fueled by an intense housing shortage have created opportunities for investors to reap big profits,” Redfin Senior Economist Sheharyar Bokhari said in a Nov. 15 statement. “Those same factors have pushed more Americans to rent, which also creates opportunities for investors because investors typically turn the homes they purchase into rentals and can now charge higher rents.”
Rent for single-family homes surged by more than 10 percent in the 12 months through September, the fastest annual rent inflation in 16 years, according to CoreLogic, a business analytics and intelligence firm.
A record share of the homes purchased by investors (74 percent) were single-family homes. Nearly 77 percent of all of the homes were bought in all-cash transactions.
“With cash-rich investors taking the housing market by storm, many individual homebuyers have found it tough to compete,” Bokhari said. “The good news for those buyers is that the housing market has started to cool. Bidding wars are on the decline, and if home-price growth continues to ease, we may see investors slow their roll.”
Redfin defines an investor as “any buyer whose name includes at least one of the following keywords: LLC, Inc., Trust, Corp., Homes,” according to its website. It also includes buyers “whose ownership code on a purchasing deed includes at least one of the following keywords: association, corporate trustee, company, joint venture, corporate trust,” noting that “this data may include purchases made through family trusts for personal use.”
Owning a home has become increasingly unattainable in 2021. While median wages rose by 4.3 percent in October year-over-year, the typical mortgage payment—a 30-year fixed rate with a 10 percent down payment—increased by nearly 17 percent, according to a National Association of Realtors (NAR) report.
The median home sale price in the third quarter topped $400,000, compared to less than $330,000 in the first quarter of 2020, before the market shakeup that was caused by the CCP (Chinese Communist Party) virus pandemic, federal housing data show.
With inflation hitting a 30-year high in October, the Fed announced that it will tighten its monetary policy, which is expected to push mortgage rates up.
NAR Chief Economist Lawrence Yun is expecting existing-home sales prices to keep rising in 2022, albeit “at a slower pace of 2.8 percent,” according to the report. New home sales prices are expected to rise by 4.4 percent, the organization predicted, “as demand eases due to higher mortgage rates.”