Phoenix investors had a major impact on the housing market in April and bought 429 units. At the national level, investors have withdrawn more inventory than they contributed in April; with their purchases made up 5.7% of all home sales.
Despite the popular belief that investors are always competing with everyday buyers, new evidence from Realtor.com’s Investor Report shows that this is not always the case. According to the data, investors are exacerbating inventory shortages in 31 of the top 50 US markets, but they are actually helping to reduce the number of homes for sale in about 19 markets – including Atlanta, Dallas, Baltimore, Los Angeles, and San Francisco.
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Realtor.com analyzed the records of US deeds from January 2000 through April 2021 to determine the number of investor sales versus purchases in the 50 largest US markets. In this report, areas where investors contribute inventory refer to places where investors are selling more homes than they are buying. Places investors take inventory are places investors buy more homes than they sell, including Phoenix investors.
“Today’s buyers are facing a tough market, and data shows they aren’t just competing with one another. With large pockets and more flexibility, investors can present daunting competition for the typical homebuyer. Right now, data shows that investors are buying more properties than they are selling, and while they get a lot of attention in today’s marketplace, remember that they can add to inventory, too, ”said Danielle Hale, Chief Economist at Realtor.com®. “Whether a market is attractive to investors depends on a number of factors, including how local home prices compare to rents. When home prices rise and rents tend to stagnate, investors are more likely to sell properties and contribute inventory. On the other hand, the higher the rents compared to home prices, the more attractive the market is for investors who want to buy their own homes and convert them into rental properties. “
Phoenix investors are grabbing homes
Investors took inventory in 31 of the largest U.S. markets, led by Phoenix investors (-429 homes), Charlotte, NC (-287 homes), Miami (-256 homes), Tampa (-224 homes), and Chicago (-221 Apartments). ). Compared to the markets where investors have helped buyers, these metropolitan areas are smaller and less crowded, with more available real estate listings relative to all households, lower property prices, and relatively higher rental growth.
Top 10 markets by negative net contributions to inventory
While the average home prices are cheaper in these top markets, the annual average rent prices (+ 4.6%) rose faster than in the top markets with more investor sales (+ 0.1%) in April. In Tampa, where the average list price of $ 327,000 in April was below the national average of $ 375,000, rents rose 4.5 times faster than the national rate, 12.4% year over year.
The markets where investors compete with home buyers and take away inventory usually offer the perfect storm of factors for converting homes into rental properties. There are relatively more homes available in these markets, with 3.7 properties per 1,000 homes versus 2.8 in markets where investors are replenishing their holdings. While these metropolitan areas saw faster inventory declines in April year-over-year (-57%), rapid rental price increases keep the cost of buying cheap, meaning investors are likely enemies of home and not friends until rental trends change.
“It’s difficult to get ahead in today’s market, especially when you’re dealing with professional investors,” said Lexie Holbert, home and living expert at Realtor.com®. “Setting up price notifications on Realtor.com® is a really helpful trick to staying one step ahead of the competition. When a home that meets your parameters comes on the market, you will receive a notification so you can get in and try to make a bid. “
Investors are helping buyers in large metropolitan areas with limited homes for sale
In April, investors increased the number of apartments on the market in 19 of the 50 largest US metropolises with Atlanta (+399 apartments), Dallas (+239 apartments), Baltimore (+188 apartments), Los Angeles (+112 apartments)) and San Francisco (+93 households) with the largest contributions. Compared to the markets where investors took inventory away in April, these subways tend to be larger, with fewer homes for sale and higher list prices.
Compared to the nationwide inventory declines in April (-53%), the top 10 markets that investors contribute saw a smaller decline averaging -44% over the same period. However, some of these metros had even bigger outages than last year, including the two markets where investors contributed the most inventory in April: Atlanta (-63.4%) and Dallas (-69.7%). With an average population of 5.5 million, these markets also include some of the largest technology centers in the country such as San Francisco and San Jose. These subways are home to some of the most expensive real estate in the U.S. and had an average list price of $ 668,000 in April, which was well above the national average of $ 375,000.
Hale added, “High property prices, slower rental growth and uncertainty about the future of working in these markets are likely to lead investors to re-evaluate their property portfolios in these areas. And since houses are still selling quickly in these metropolises, an investor who decides to sell can look forward to being able to reposition his dollars elsewhere in a very short time. “
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