Home buyers face increased competition from investors

Investors purchased 67,943 houses during the second quarter of 2021, the highest quarterly figure on record, according to Redfin. (Charles Krupa/AP)

As if buyers didn’t face enough competition from other people looking for a home, a new report from Redfin real estate brokerage shows that real estate investors are back in the market at close to their pre-pandemic record level.

Investors purchased 67,943 houses during the second quarter of 2021, the highest quarterly figure on record. (Redfin’s records date back to 2000.) One of every six homes (15.9 percent) purchased during the second quarter of this year was bought by an investor, nearly the same as the record market share of 16.1 percent in the first quarter of 2020. Investor purchases increased by 15.1 percent from the first quarter of 2021 to the second quarter of 2021.

Investors are attracted by rising home prices and high demand in the rental market, which means they can easily find tenants and anticipate eventually selling for a profit, according to analysis by Redfin’s senior economist Sheharyar Bokhari. While 74 percent of investors paid cash for their purchase, the highest level since 2018, low mortgage rates are another incentive for investors who choose to finance their purchase.

Lower-priced homes and hot housing markets appeal to investors

Investors gravitate to less costly homes, with 21.2 percent of low-priced homes purchased by an investor in the second quarter of 2021 compared to 13.8 percent of mid-priced homes and 13.5 percent of high-priced homes.

While the most popular type of property for investors continues to be apartment buildings, investors purchased a higher market share of single-family homes (16.1 percent) and condos (15.1 percent) during the second quarter of 2021 than during the second quarter of 2020. Investors purchased 26.5 percent of all apartment buildings bought during the second quarter of 2021.

Both home buyers and investors have been attracted to less expensive smaller cities in recent years. The city with the highest share of purchases by investors (24.5 percent) in the second quarter of 2021 was Phoenix, followed by Miami (24.2 percent), Atlanta (23.6 percent), Charlotte, (22.8 percent) and Las Vegas (22.8 percent).

The investor share of purchases during the second quarter of 2021 in the D.C. metro area is among the lowest at 6.9 percent, compared to 18.6 percent in San Francisco, 17 percent in Los Angeles, 13 percent in New York City and 8.9 percent in Seattle.

Other markets with fewer investors include Providence (6.4 percent), Warren, Mich. (6.7 percent), Virginia Beach (7.7 percent) and Montgomery County, Pa. (7.8 percent). For the full report, click here.

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