The home-buying market is getting more competitive as Wall Street investors mobilize into the single-family housing sector, driving up the price of real estate.
Research by the National Association of Realtors indicated that institutional buyers accounted for 15 percent of residential home purchases in 2021. Texas had the highest fraction of purchases with a market share of 28 percent, followed by Georgia at 19 percent.
Moreover, eighty-four percent of states have seen an increase in the number of investors buying residential homes from 2020 to 2021, including Mississippi, Colorado, and Florida.
As families look to buy new homes, they’re facing tougher competition from buyers who have a lot of cash and are securing single-family homes to make them rental properties.
An estimated 80,000 homes worth $50 billion were purchased by institutional buyers in the fourth quarter of 2021, according to the latest data released by Redfin. Homes in the mid-priced range have gained popularity with investors, representing 32.3 percent of their purchases in the fourth quarter, up from 24.1 percent a year earlier.
While rental-ready opportunities garner the interest of investors, there are a number of other factors that attract deep pockets to a specific real estate market.
Markets yielding a 40 percent appreciation in the last decade and an average of 12 percent in sales activity are highly considered. Additionally, investors are attracted to markets where rents have increased more than 30 percent on average in the past decade and where households earn more than $60,000 annually.
Buyers are battling multiple offers as institutional investors storm through the competition.
Yesterday, U.S. Senators Elizabeth Warren (D-Mass.) and Jack Reed (D-R.I.), sent a letter to the Secretary of the Department of Housing and Urban Development (HUD), calling to preserve homeownership affordability for American families as Wall Street firms expand their activity in the housing market.
According to the letter, the market conditions are favorable for large investors. More than 75 percent of investor home purchases were paid with cash. Senators Warren and Reed suggest that:
“These investment activities will make home ownership less available and affordable for American families and jeopardize HUD’s ability to meet its mission “to create strong, sustainable, inclusive communities and quality affordable homes for all.”
Families are increasingly feeling the impact of rising housing costs and a lack of inventory, even as our market begins to swift.
There were more homes for sale in 4 of the 5 weeks that ended in April, according to Realtor.com. Experts say that as inventory increases, thinking outside the box may help buyers stay competitive.