For years, many hopeful homebuyers have had the same concern: how do you compete with big investors who can pay cash and scoop up the homes you want before you even have a chance?
The good news is, you can worry a little less. Right now, those big investors aren't taking over the market. In fact, many of them are pulling back instead.
Investors Are Buying Fewer Homes Than They Have in Years
According to Redfin, investor home purchases have dropped to their lowest level since 2020, when the start of the pandemic temporarily slowed the housing market. Outside of that, you'd have to go back to 2016 to find a time when investors were buying this few homes (see graph below).
Why the pause? There are two main reasons.
First, Washington passed a new housing law aimed at large institutional investors. While these big investors were never as dominant as the headlines suggested and only made up a small share of the housing market, the new law focused on the biggest players and had an immediate impact. According to Thom Malone, Principal Economist at Cotality:
““When Washington announced its intention to curb institutional investors’ homebuying, the market reacted. . . Cotality data shows that investment by mega investors who own 1,000 or more properties retracted almost instantly.”
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Second, the housing market has cooled. Home price growth has slowed in many parts of the country, and in some areas, prices are even starting to come down. That makes it much less attractive for investors hoping to make quick profits. As Lance Lambert, CEO of ResiClub, explains:
““Ever since rates spiked and the Pandemic Housing Boom fizzled out in spring 2022, institutional single-family rental (SFR) operators have pulled way back from buying up homes on the resale market—the math just isn’t as appealing right now. Home prices and rents are no longer ripping, holding costs (property taxes and insurance) have jumped, capital markets have shifted their attention elsewhere, and elevated materials prices make renovations expensive.”
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They’re Not Just Buying Less – They’re Selling More
Here's what many people don't realize. Big investors aren't just buying fewer homes. They're actually selling more homes than they're buying. Data from Parcl Labs and ResiClub shows that the largest institutional investors have been net sellers for the past four quarters, and that gap continues to grow (see graph below).
Every home investors sell goes back on the market, giving buyers like you more opportunities. And because large investors often own more affordable homes, many of the properties they're selling are exactly the type that first time buyers are looking for. As Malone puts it:
““. . . this sudden dropoff in institutional investment is a signal to first-time homebuyers that there’s an opening.”
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With fewer deep pocketed investors competing for homes, more properties are becoming available. And many of them are priced for first time buyers. It's a change that gives you a better chance to find a home that fits your budget.
Bottom Line
If you've been waiting for a better opportunity to buy a home, now may be the time. Big investors are stepping back and putting more homes back on the market, giving buyers more choices. Let's connect so you can see what's available in our area. You may have more options than you realize.
