What it means for investors to buy a home
According to Redfin, in this context, an investor is defined as any institution or company that purchases residential real estate. Investor purchases typically reflect buyers who use a limited liability company (LLC), another form of corporation, or trust to purchase a home, and typically purchase a home to generate income or profit. Some intend to use the home as a part-time residence or vacation home.
Chen Chao, senior economist at Redfin, said investor share refers to the percentage of homes purchased by investors over a given period of time.
According to Redfin, the percentage of homes purchased by investors in the first quarter of 2024 was 19%.
“This means that, by our measurements, about 81% of the homes are being bought by people who are not investors, meaning they are probably buying them to use as their primary residence,” Zhao said.
Institutional investors — real estate investors who own at least 1,000 single-family homes — own about 1% of the total U.S. housing stock, according to an analysis by research site ResiClub based on data from real estate data firm Parcl Labs.
Measuring investor influence is ‘complex’
In a new report, Moody’s Analytics looked at the relationship between investor sales share and homeownership rates, or the number of households that own a home, by metro area.
“The relationship between the two seems pretty weak,” said Matthew Walsh, assistant director and economist at Moody’s Analytics.
In other words, there’s little evidence it’s driving homebuyers out of the market, he said.
The analysis shows that “these investors are not actually taking up a significant portion of the housing stock and are not preventing homeownership for traditional family buyers,” he said.
Investors are buying existing homes at high rates in some areas — in some cases accounting for about a third of all purchases — according to Moody’s, but that doesn’t necessarily mean they’re crowding out consumer homebuyers, Moody’s analysts told CNBC.
Redfin’s Chao said it’s nearly impossible to gauge how much of a “crowding out” effect there is in the market.
“That question is really complicated to answer, and it can’t be answered by just looking at some pretty simple data,” Zhao said.
Walsh said part of the recent increase in real estate investor activity is due to seasonality, with more home sales typically occurring in the spring.
Additionally, mortgage rates were at low levels at the start of 2024 but rose in April, he said.
Walsh said the housing market was at its peak in 2022, with home sales booming through the middle of the year. Sales began to decline as mortgage rates rose, and rising rates impact both residential homebuyers and investors.
What investor interest means for buyers and renters
If you’re buying in the marketplace, you’ll be competing with investors as well as other regular home buyers, Zhao explained.
“You have to consider what investors are going to do with those homes, and that’s where it gets a little more nuanced,” she said.
Many investors are renting out single-family homes, which may not be good for potential buyers, but it’s a “good sign” for renters because it increases the area’s rental supply, Zhao said.
“Having that extra supply out there is really important for people looking for larger rental properties,” she said.
Meanwhile, some investors are buying properties deemed uninhabitable, fixing them up and putting them back into the housing supply, which is ultimately a good thing for the housing market, she said.
“This is a very delicate discussion given how investor activities affect the housing market,” Zhao said.
