Real estate investors during the second quarter of 2021 purchased more homes than ever recorded by Redfin.com, which has been tracking that metric for 20+ years.
"Investors took the housing market by storm in the second quarter, as surging property prices and rental demand created opportunities for hefty profits," noted Redfin authors Lily Katz and Sheharyar Bokhari.
Also on the rise is the share of property investors banking on single-family homes and condominiums, according to the brokerage firm's Q2 report.
"While multifamily buildings are the most common property type purchased by investors, investor market share in this segment has declined during the pandemic," the authors said. "Meanwhile, investor market share of single-family homes and condos is on the rise after dropping during the pandemic."
Investors purchased 67,943 homes totaling an estimated $49 billion during Q2. This marks a 15% rise from Q1 and a 107% increase from the same quarter in 2020 (note the market was stalled due to pandemic restrictions).
Investors paid an average $439,600 per home, about 24% higher than a year earlier.
The market share for investor purchases has nearly returned to pre-pandemic levels, Redfin reported. One of every six homes, approximately, was sold to an investor in Q2. That is 15.9% of the market share, which is just a hair short of the 16.1% record hit in Q1 2020, just prior to the onset of the pandemic-prompted economic downturn.
Experts say today's soaring home prices spell opportunity for investors.
“With housing values consistently on the rise, solid returns are pretty much guaranteed—especially when you’re an investor who has access to extremely cheap debt,” Redfin Senior Economist Sheharyar Bokhari said. "Investors are also taking advantage of surging demand in the rental market. With so many Americans priced out of homeownership, investors can turn an easy profit by buying up properties and renting them out.”
Such interest from investors is making for a more challenging homebuying environment, many recent reports have revealed.
Investors tend to come to the table with cash offers, with which they easily win bidding wars against, especially, first-time or low-income buyers. While competition is easing slightly, about two-thirds of home offers written by Redfin agents still faced multiple offers on the same listing, the brokerage's latest report showed.
Speaking on this Q2 investor report, Bokhari echoed that idea.
“With investors throwing money at the housing market, some homebuyers are finding it tough to compete. Investors frequently pay with all cash, which means they often have a much higher chance of winning bidding wars than buyers who take out mortgages.”
These conditions could be leading to growth in the single-family rental market and costs to renters, other experts contend.
In fact, high investor activity likely is contributing to the overall boost in all-cash home sales—about three-quarters, or 74%, of investor home purchases in the second quarter were financed with all cash—the highest level since 2018.
So far this year, the percentage of overall cash home purchases, at 30%, represents the largest share since 2014, and Redfin's experts say the rise in investor activity is "likely contributing to the increase."
Redfin showed that investors are more likely to purchase lower-priced homes compared to mid- or higher-priced units, and that Miami and Phoenix lead the way in investor purchases of single-family houses.