How Much Of The Real Estate Market Are Investors Really Purchasing?

Are large investors truly purchasing all the homes today?

If you're in the market for a new home, you might be pondering this question. Perhaps you've come across articles or social media posts suggesting that homes are being snapped up by investors, making it challenging

for regular buyers to find a property. However, here's the truth – there's a lot of misinformation circulating. Let's set the record straight on the current situation. Much of the significant investor activity is now a thing of the past.

The Wall Street Journal (WSJ) explains:

“Investors of all sizes spent billions of dollars buying homes during the pandemic. At the 2022 peak, they bought more than one in every four single-family homes sold, though more recently their activity has slowed as interest rates rose and supply became tighter.”

The crucial point is that investor activity has notably decreased. Even at the peak of investor purchases, 3 out of every 4 single-family homes were bought by typical homebuyers, not investors. Moreover, the majority of recent investors were not large-scale investors often highlighted. Instead, they were predominantly small-scale mom-and-pop investors – individuals similar to your neighbors who own just a few properties, possibly their primary residence and a vacation home.

However, let's shift our attention to the large, mega-investor firms since they are currently a hot topic on social media. Mega investors are individuals or entities that possess over 1,000 properties. Surprisingly, as reported by the Wall Street Journal, they do not purchase a significant number of homes (refer to the graph below):

The graph conveys two key points. Initially, institutional investors only purchased a small portion of the available homes, with a peak of around 2% in 2022. Secondly, this percentage has decreased even further lately, reaching a point so minimal that it rounds down to 0%.

To comprehend the reason behind the declining percentage, the private lender RCN Capital conducted a survey among investors to identify the challenges they are encountering. This is what Jeffrey Tesch, the CEO of RCN Capital, discovered:

“Investors are already facing many challenges in today’s housing market – rising prices, limited inventory, and higher financing costs.”

It is crucial to comprehend these challenges as they indicate that large, institutional investors are not dominating the housing market.

Don't believe everything you hear. They are not buying up all the homes, making it impossible for regular people to purchase.

Moral of the Story

Major investors are not purchasing all available homes. If you have any questions about the current housing market news, feel free to reach out. I can provide clarity on the actual situation.