SFR Investor Purchases Rebound in 2022
By Erik Sherman
July 08, 2022 at 08:23 AM
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This may be the new normal for the market.
Although investors seemed to cool on single-family rental purchases in December 2021, apparently they were only taking a break, according to a new CoreLogic report.
“Although the real estate market showed signs of receding in Q4 2021, investors resumed their buying spree in early 2022,” the report said. “Investors made 28.1% of all single-family purchases in February, a record high according to CoreLogic’s data that goes back to 2011. March registered similarly high figures, with an investor share of 27.9%.”
A graph included in the report shows investor share of single-family home purchases “rising nearly 5 percentage points from December (21.8%) to January (26.6%).”
There had been a drop between August 2021 and December which seemed to signal falling interest on the part of investors. But things do seem to have rebounded. While non-investor purchases swung up in March, so did those by investors, which “is not commonplace” for that time of the year, according to CoreLogic. Though, the firm notes that the investor increase may have been to lock in good rates while they were available. Also, as stock prices were decreasing, there may have been a thought that SFRs were an “attractive alternative investment.”
The breakout by investor size showed that small investors, with fewer than ten properties, made nearly half of all investor purchases in the first quarter of 2022. That’s on a rough par with activity since 2019. Medium-sized investors, with 11 to 100 properties, saw a decline from high 30s to 31% in the quarter. Large investors have been slowly increasing their portion since 2019 and made up 9%. “Mega” investors, with more than 1,000 properties, had a big surge in the first half of 2021 to close to 20%, dropped to about 12% by January 2022, and remained about there for Q1.
An interesting dynamic is investor distribution by price tier. The largest portion, about 32%, was in the lowest price tier. That’s a common approach based on the dynamics of people renting instead of buying homes and the price even large investors can afford to ensure profitable operation. About a third of lower-price home purchases were by investors, “creating extra competition for most first-time home buyers who are looking in the same areas.” This has already created a backlash and even attempts in some cities to reduce the number of homes purchases by investors.
Somewhat surprising is that more than 25% of the purchases were mid-priced homes and about 23% were high-priced. Whether they’re being rented out or flipped the data doesn’t say.
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