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Investors Replenishing Housing Stock in 19 Major Markets

Investors are snapping up single-family properties, which already are in short supply, at a quickening pace, research shows. That often puts the everyday house hunter in competition with professional buyers who almost always have an upper hand, but an Investor Report from from economists at Realtor.com shows that, in a few big markets, rather than exacerbating the inventory shortage, investors are actually helping to replenish the number of homes for sale.

It is true that in most localities—31 of the top 50 markets—incorporated investment is putting the average Joe at a decided disadvantage, buying more than they are selling. But in 19 major metros, including Atlanta, Dallas, Baltimore, Los Angeles, and San Francisco, the opposite is true.

Experts say that it is tempting—considering today's market conditions—to be discouraged by the idea of corporations competing with people, but that in some cases, investor involvement could prove beneficial.

"Today's buyers are facing a tough market and data shows they aren't just competing with each other. With deep pockets and more flexibility, investors can be daunting competition for the typical homebuyer. Right now, data shows investors are buying more homes than they are selling, and while they get a lot of attention in today's market, it's worth remembering that they can also contribute to inventory levels," Realtor.com Chief Economist Danielle Hale said "Whether a market is appealing to investors depends on a variety of factors, including how local home prices compare to rents. When home prices are rising and rents are more stagnant, investors are more likely to sell off properties and contribute inventory. On the other hand, the higher rents are compared to home prices the more attractive the market is to investors looking to buy homes and convert them into rental properties."

Here is a look at how much commercial investment in April added to the housing stock in a few cities:

Atlanta : +399 homes

Dallas: +239 homes

Baltimore: +188 homes

Los Angeles: +112 homes

San Francisco: +93 homes

As a rule, cities where investors contributed inventory tended to be larger, with fewer homes for sale and higher listing prices.

"High home prices, slower rent growth, and uncertainty over the future of work in these markets are likely causing investors to reevaluate their property portfolios in these areas.," Hale said. "And with homes still selling quickly, even in these metros, an investor deciding to sell can look forward to being able to reposition their dollars elsewhere in a very short period of time."

Other areas—those where professional buyers are indeed snatching up more inventory than they are supplying—offer riper conditions for converting homes into rental properties.

"These markets have relatively more homes available, at 3.7 properties for every 1,000 residences versus 2.8 in markets where investors are adding to inventory," according to Realtor.com's report. "While these metros have experienced more rapid year-over-year inventory declines in April (-57%), rapid rent price gains keep calculations favorable for buying which means that until rent trends change, investors are likely to be homebuyer foes, not friends."

Realtor.com recorded the toughest investor competition in Phoenix, Charlotte, Miami, Tampa, and Chicago.

On a national scale, investors bought 5.7% of homes sold in April and sold less, 5%.

Altogether, investor purchases of homes are up 103% year-over-year in April 2021, and up 12% over the same time period in 2019.

Realtor.com's team pointed out, for what it is worth, that during the height of the coronavirus pandemic, in 2020, investors did sell more than they bought, thus contributing to the housing supply—that trend reversed course last October.

The full investor report is available at Realtor.com.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media and Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning News, among others. Contact Christina at christina.hughesbabb@thefivestar.com.
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