Investor Purchases of Homes Has Doubled from Pre-COVID Levels
Updated: Jun 7, 2022
By Paul Bergeron
January 27, 2022, at 06:57 AM
View source version HERE
iBuyers concentrate in five states with the fastest population growth in recent years with Texas and Arizona dominating.
CoreLogic reports that iBuyer (or Instant Buyer) transactions doubled in 2021 compared to pre-pandemic levels.
As its recent analysis showed, investor purchases accounted for about a quarter (26%) of all home purchases in Q3 2021, up from 16% seen in 2019.
iBuyers use technology to buy and resell homes quickly. When selling a home to an iBuyer, the seller gets a cash offer for the home “as is” and avoids the uncertainty of knowing when and if their home will sell and if repairs are needed.
While iBuyers have been around since about 2015, in 2021 their purchase activity doubled compared to 2019 levels and currently account for about 1% of total home purchases.
Texas and Arizona (primarily Phoenix) were the top states for iBuyer purchases. Zillow showed the greatest increase in buying volume during that time and Opendoor accounted for the most overall since 2017.
Reselling Homes to Investors
Another trend that evolved over the past couple of years is that iBuyers have increasingly resold the homes in bulk to other (mostly big) investors. The share of iBuyer purchases resold to investors increased from 5% at the beginning of 2019 to 22% by the end of that year.
Nevertheless, at the onset of the pandemic, resales to big investors surged to 38% as iBuyers looked to reduce their risks with market uncertainty and widespread lockdowns. The resale share has since fallen back to 20% but could be partially contributing to the overall increase in total investor share.
The Top Four iBuyers
Since 2017, the top four iBuyers–Opendoor, Zillow, Offerpad, and Redfin–accounted for over 95% of iBuyer purchases. While these iBuyers ramped up their activity in 2021, Zillow stands out with the largest increase in purchases compared to 2019 levels, up 222% in the first three quarters of 2021.
Opendoor accounts for the largest share of overall purchases since 2017, totaling about 56%. Zillow ranks second with a total share of about 24% and Offerpad is third with 18% of purchases. Redfin has a smaller share at 2%.
Where They Are Buying
Geographically, iBuyers have generally concentrated in areas that have seen the largest population gains in recent years. The top five states that comprised 75% of overall iBuyer purchases since 2017 include Texas (20%), Arizona (20%), Florida (12%), Georgia (13%), and North Carolina (10%).
While these five states generally ranked in the top five since 2017, the ramp-up of activity in 2021 in California brought the state to fourth place, replacing North Carolina.
Like the concentration of iBuyer activity in the five states, 76% of purchases were located in 10 metro areas in those states. Phoenix, which ranks with the highest share of iBuyer activity (20%), is where the majority of Arizona’s iBuyer purchases took place.
In Georgia, most iBuyer activity is concentrated in Atlanta, which accounts for 14% of overall iBuyer purchases. As a result, 5% of overall home purchases in Atlanta in 2021 are iBuyers.
In Texas, which accounted for 20% of purchases, iBuyers have tapped into multiple markets, including the three that rank with the highest concentration of iBuyers: Dallas (10%), Houston (5%), and San Antonio (3%). Florida is another state where more than one market ranks among the top 10 markets, including Orlando (4%) and Tampa (4%).
Click here to return to the homepage