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Real Estate Investors Getting More Bang for Their Buck

A new analysis by Rick Sharga, EVP of RealtyTrac, has found that investor purchases accounted for 15.4% of all home purchases nationally in Q2 2021, compared to 11.5% in Q2 2020–a year-over-year increase of 3.9 percentage points.

In addition to the noted annual increase in investor purchase activity, RealtyTrac’s Fall 2021 Investor Purchase Report shows that investors are typically paying less for homes than consumer homebuyers, and that investors continue to pay for most of their purchases with cash. While the year-over-year percentage of investor purchases rose, the investor purchase share remained virtually the same as the previous quarter with investors accounting for 15.4% of all purchases in Q2 2021, compared with 15.9% in Q1 2021.

“Historically, investors have always accounted for somewhere between 10% and 15% of residential home purchases, and our data shows that this is still the case today, albeit at the high end of that range,” said Sharga in his report. “But the data doesn’t support the ‘Wall Street is buying up Main Street’ theme that’s been a popular theory for the past year or so.”

At the state level, the percent of investor purchases among all home sales increased year over year, from Q2 2020 to Q2 2021, in all states and the District of Columbia except for six states: Alaska, Louisiana, Maryland, Nebraska, Vermont and West Virginia.

Citing home sales data from ATTOM Data Solutions, RealtyTrac’s report also shows that investors across the country paid an average of 29.4% less than consumers in Q2 2021 with a median purchase price of $205,000 for investors compared to $290,230 for all home purchases. RealtyTrac found that among the 38 states with full reporting data for this metric, investors paid less than the state median sale price in all but these five states in which they paid at or more than the state median:

  • Vermont: average 34% premium over state median (numbers artificially inflated due to a single sale of a high-priced property);
  • California: average 3.3% premium over state median;
  • Massachusetts: average 3.0% premium over state median;
  • Washington: average 1.0% premium over state median; and
  • Nevada: investors paid, on average, the same as the state median sale price

States with the highest purchase discounts for investor properties as of Q2 2021 include:

  • Arkansas: 76.9% discount
  • Michigan: 60.0% discount
  • Louisiana: 55.5% discount
  • Nebraska: 55% discount
  • West Virginia: 51% discount
  • Oklahoma: 50.3% discount

“Another misconception is that investors are overpaying for properties, making it difficult for consumers to compete and artificially driving up prices,” Sharga said. “But successful investors tend to look for below-market pricing in order to make a profit on their purchases. And many of them buy properties with cash, which gives them a chance to get properties at a discount.”

The study also found that many of the sales were all-cash deals, as in Q2 2021, 79% of all investor purchases were cash sales, compared with 69% in Q2 2020, a year-over-year increase of 10 percentage points. Cash purchases accounted for more than 50% of all investor purchases in every state, including the District of Columbia, except for one–Alaska–in Q2 of 2021. This compares to Q2 2020, when cash purchases accounted for more than 50% of all investor purchases in only 41 states with 10 states at less than 50% in cash purchases.

Click here to see more from the Fall 2021 RealtyTrac Investor Purchase Report.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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