A new report from CoreLogic notes that the share of single-family homes bought by investors fell from a high of 28% in February 2022 to 20% in June. Although this is a significant decline, investor market share is up from the low point of 14% reached at the start of the COVID pandemic in 2020.
A cyclical market or not
Data presented by CoreLogic shows the strong seasonality of single-family home buying activity by non-investors. It is very common for monthly purchases of single-family homes by non-investors to be 50% higher during the summer months than in January and February. Investor purchases are much less seasonal. As a result, investor market share tends to be higher during the winter months, due as much to the decline in non-investor buying during these months as any increase in investor buying.
The recent decline in the share of investors in the single-family home market is due to both the seasonal increase in purchases by non-investors and a decline in purchases by investors. The report speculates that the decline could be due to investors being more sensitive to the recent interest rate hike than non-investor buyers, but clarifies that this is conjecture at this stage.
The myth of the mega investor
Although concerns have been raised recently about large institutional investors like Blackrock buys single-family homes, the CoreLogic report finds that the majority of investors in single-family homes are smallholders. The report notes that 48% of single-family homes purchased by investors in June were purchased by investors who own 10 or fewer properties. Investors who own 11 to 100 properties purchased an additional 28% of single-family homes purchased by investors in June. Mega-investors who own 1,000 or more homes accounted for just 14% of investor purchases in June.
What may worry those interested in housing affordability is that investors are more active in the low-cost housing market. Investors bought 28% of these homes in June while only buying 15% of high-priced homes.
The main metropolises for purchases of single-family homes by investors in the second quarter were Atlanta, Phoenix, Las Vegas and Memphis. In each of these markets, mega-investors were over-represented and small investors were under-represented relative to their shares of the national single-family home purchase market.
In search of palms
CoreLogic reported that the share of single-family homes purchased by investors that have been resold within 6 months has varied between 13% and 18% since January 2019. As of June 2022, 17% of homes purchased in December 2021 had been resold. .