In a report released on Monday, CoreLogic recaps investor activity in the housing market over the past decade. Its Investor Homebuying report highlights buying trends nationwide by both investor size and the price level of goods purchased between 2011 and 2020.
The report states that at the start of this period, in 2011, the country “had recently reappeared after the real estate crash of 2006 *”, and foreclosed properties were flooding the market. Many investors were looking to buy potentially high growth residential properties at a discount during this time. This buying frenzy peaked in 2018 with a 16.8% share of sales from investors. Then the pace of investment slowed down. The following year, the investment rate was 16.3%, falling to 15.5% in 2020.
The report points out that this rate is 0.2 percentage point lower than the investor rate in 2012, when low prices and the foreclosure crisis made home purchases attractive to investors. CoreLogic says investors have maintained a strong market presence over the decade, with their stake hovering between 15% and 17% of total purchases. While this share has fluctuated up and down, the number of homes purchased has gradually increased. Since 2017, investors have bought an average of 1.1 million homes while their share has varied with the total purchase market.
Investing in single-family rental real estate has long been dominated by so-called mom and pop investors, which CoreLogic defines as those “who have kept three to 10 homes.” Attention was focused on large investors who bought hundreds of thousands of foreclosed homes during the Great Recession, but small investors remain responsible for most of the activity and their rates appear to be increasing. Between 2011 and 2020, their share increased from 54 to 56%. Between 2018 and 2020 alone, it went from 53 to 56%.
Small investors seem to have snatched their increased share from those of the medium-sized, owners of 11 to 100 homes. Their share of purchases rose from 34% to 32% between 2018 and 2020. Large investors, those who have kept more than 100 homes, have remained stable at around 12% over the past three years.
CoreLogic says that despite the drop in rates, investors have maintained a strong market presence over the past 10 years. The growing share of homes bought by small investors is likely due to a large out-migration from expensive areas to more affordable areas, allowing smaller investors to appropriate properties at lower rates.
Not surprisingly, investors tend to buy cheaper homes. In the one-third lower price bracket, investors made 18.8% of purchases in their respective metropolitan areas. The middle third and top third each had a 12 percent share. Investor activity has declined by 1 or 2 percentage points in all three levels since 2018, in line with the overall decline in investors.
“At this critical juncture – the first year of the new decade and continually moving away from the pandemic – when the hot housing market cools, we might see investor activity spike as they try to buy more. lower priced properties, ”said Molly Boesel, senior economist at CoreLogic. “While investors appear to have ceded some of their coveted market share to buyers, it’s hard to say how long this trend will last – or what the longer-term implications will be on a larger scale.”
The company also looked at investor activity at the regional and metro level and found that, while California dominated investor activity a decade ago, with seven subways in the top 10, no California city was on the list. this list in 2020. Instead, the rulers were spread across the mountains of the West, Midwest, and South in cities with low prices and growing populations.
Investor activity has been weakest in the Northeast over the past decade, with eight of the last 10 metropolitan areas coming from this region. Hartford had the lowest investor share at just 8 percent.
CoreLogic also found that investor market share has grown along with overall market share over the past decade as housing turnover increases. At the metro level, there seems to be a good correlation between the two.
While CoreLogic says it can’t conclude positively, the correlation could indicate investors are buying homes that might otherwise have been bought by homeowners. On the flip side, it could mean that investors just spot a hot market and choose to go ahead, anticipating further growth.
An additional factor influenced investor behavior in 2020; the imposition of moratoriums on evictions. In places with moratoria and strong tenant rights, tenants who could not pay made it difficult to secure a reliable and lucrative investment. These restrictions have likely discouraged investor activity as they have brought an additional layer of risk to the market.
While investors’ share of home purchases has declined since its peak in 2018, CoreLogic says it can’t definitively tie this to a single market condition. This cannot be attributed solely to the coronavirus pandemic, as rates were also falling in 2019.
The report concludes: “Although investors appear to have lost some of their market share to homeowner buyers, it is difficult to say how long this trend will continue or what long-term implications it will have in the market. wider. At this point, the first year of the new decade and the first year since the start of the pandemic, what we can see as the housing market cools – with more inventory to sell and slower price growth. of homes in 2022 – is an increase on the part of investors. “
* Editor’s Note: Although we have never encountered this reference before, the report makes several references to the 2006 real estate crash.