According to the data from real estate data provider BatchData and the latest report from real estate consulting service company CJ Patrick, in the second quarter of this year, individual and institutional real estate investors purchased one-third of single-family homes in the United States, accounting for 33%, which is higher than the 27% in the first quarter and 25.7% from the previous year, reaching the highest level in five years.
Although investors’ share has increased, the actual number of home purchases has been decreasing. The report points out that in the second quarter of this year, the number of homes purchased by investors decreased by 16,000 compared to the same period last year, due to the overall lower housing sales volume this year compared to the previous year. Currently, investors hold about 20% of the 86 million single-family homes in the United States.
Ivo Draginov, co-founder and Chief Innovation Officer of BatchData, stated, “The number of homes purchased by investors in the second quarter exceeded those sold. They sold over 104,000 homes, with 45% of them sold to traditional owner-occupiers. This indicates that investors not only provide necessary liquidity to the sluggish housing market but also bring much-needed supply to the market, including rental and owner-occupied homes.”
In the single-family rental market, although large institutional investors often grab the spotlight, in reality, small investors hold over 90% of the market share. They typically own fewer than 10 properties. The largest investors with over 1,000 properties account for only 2% of the total real estate investor population.
Unlike individual investors, institutional investors have been selling more than buying for six consecutive quarters. According to analysis from real estate and financial analytics company Parcl Labs, major landlords in the United States, such as Invitation Homes, Progress Residential, American Homes 4 Rent, and FirstKey Homes, have all seen higher home sales volumes than purchases in the third quarter of this year.
Rick Sharga, the founder and CEO of CJ Patrick, commented, “These institutions have not withdrawn from the market but have shifted their funds toward ‘rental-oriented’ communities. This shift reduces competition from small investors and traditional homebuyers while increasing the supply of rental housing, necessary in today’s market as many young people cannot afford to buy a house and can only rent.”
In terms of regions, investors in Texas, California, and Florida own the most properties due to their high population densities. The states with the highest proportion of properties owned by investors are Hawaii, Alaska, Montana, and Maine, all of which are states known for their thriving tourism industries.
Data shows that investors typically prefer to purchase lower-priced homes because of the higher potential profit margins upon resale. According to CJ Patrick’s report, in the second quarter of this year, the average purchase price for investors was $455,481, significantly lower than the national average home price of $512,800. This marks the highest average purchase price for investors in six quarters, indicating a continuous rise in overall home prices.
Generally, investors tend to buy smaller-sized homes or homes in lower-priced markets. Large investors buy at even lower prices, with an average purchase price of only $279,889 and an average selling price of $334,787. Institutional investors are predominantly concentrated in the Midwest and Southern regions of the United States, where housing prices are generally lower than the national average.