Average American homebuyers have cause to rejoice: Recent findings show the amount of residential real estate supply being scooped up by corporations has dropped precipitously, meaning less competition for the common folk.
Year-over-year, businesses bought 46% fewer homes in the fourth quarter of 2022 than they did in 2021, a new analysis by real estate brokerage Redfin reported. The recent decline set a new record, putting the subprime mortgage crisis of 2008 — during which time investor purchases slumped 45% — in second place for the largest fall since 2000.
The shift was felt most significantly in pandemic boomtowns, with Las Vegas and Phoenix seeing the largest slip in investor investment — more than 60% — of any metro area. Single-family homes and high-priced properties, Redfin found, also saw much steeper declines in investor interest than condos, townhomes and low-priced properties.
Notably, investor market share has remained “fairly steady,” Redfin reported. The reason is that individual homebuyers are also purchasing less prolifically.
As for the cause of investors’ lost interest, Redfin blames the current high cost of borrowing money — as the Fed raised interest rates to combat ongoing inflation — and the looming prospect of home values going down appreciably.
“A lot of investors are on hold because they still see home prices declining,” said Florida-based Redfin agent Elena Fleck in the report. “The investors who are in the market are selective and aggressive. Many of them are only offering around [60%] of the asking price since it’s so difficult to make a profit when flipping homes right now.”
Other experts believe the shift — and brief competitive interlude for non-corporate plebeians — will prove fleeting.
“It’s possible that investors will start to wade back into the market this year given that mortgage rates have ticked down from their 2022 high — especially if home prices show signs of bottoming,” Redfin senior economist Sheharyar Bokhari said. “But it’s unlikely that investors will return with the same vigor they had in 2021. That’s good news for individual buyers, who are still grappling with high housing costs but no longer losing bidding war after bidding war to investors.”
In 2021, investors piled into the housing market due to rock-bottom mortgage rates and surging housing demand. But with studies showing that home prices will continue to fall, investors continue to retreat.
“Investors use multiple strategies to buy, flip and sell properties and that means they are always exploring creative financing options and not relying on a traditional mortgage,” Kurt Carlton with New Western, a real estate investment marketplace, told The Post.
“Full-cash offers become an obvious option when rates rise but that’s just the beginning.”
Still, Carlton said that while most investors have backed off now, this leaves room for independent investors to enter the market, and he predicts in the new fiscal year, there will be more activity.
“Local investors look at each deal separately and know where to put their capital,” Carlton added. “They are experts at understanding their local market and generally focus on opportunities to create value through rehabilitation.”
He added, “The reality is, we’re missing 5 million homes in the US, so at the end of the day, local investors are putting a much needed category of homes back into inventory. Many of our investors are purchasing and fixing homes that the average home-buyer won’t touch — homes that are in need of major repair and renovations. And they are making homeownership more affordable since our investor homes sell for 31% less than traditional homes in the same market.”
https://nypost.com/2023/02/24/investor-homebuying-has-fallen-by-nearly-50-report/
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