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Buyer demand reaches record high as investors snap up homes

Buyers who were unable to find a place to purchase in the spring are coming back this fall in the hope that more homes will be available. However, inventory is significantly down, and prices are up. (Luke Sharrett/Bloomberg News)
3 min

In normal years, many people take a step back from the real estate market as fall sets in, then jump back in after the new year begins. In 2021, with mortgage rates still low and the economic and lifestyle impacts of the pandemic still influencing consumer behavior, buyers continue to be out in full force across the United States.

Two reports from the Redfin real estate brokerage show that investor activity reached an all-time high during the third quarter of 2021 and that buyer demand also recently reached a record high.

Redfin’s Homebuyer Demand Index reached its highest level during the four-week period that ended Nov. 14. This was the peak demand in the index since at least 2017, when the brokerage began tracking requests for house tours and other home-buying services. Buyers who were unable to find a place to purchase in the spring are coming back this fall in the hope that more homes will be available, according to Redfin’s chief economist, Daryl Fairweather.

Shortage of homes for sale continues to plague housing market

Unfortunately, active listings, which refer to all homes on the market and not just new listings, were down 22 percent during the four-week period that ended Nov. 14 compared with the same period in 2020, and down 41 percent compared with that same period in 2019.

Prices were up, too, across the nation. Redfin’s data shows that the median sales price of $357,881 in November represented a 13 percent increase from November 2020 and a 30 percent increase from November 2019.

Despite higher prices, homes continued to sell quickly. According to Redfin, 45 percent of homes sold within two weeks of being listed, and 32 percent sold within one week during the four-week period that ended Nov. 14. Both of those numbers were well above 2020 and 2019 figures.

A contributing factor to the lack of homes for sale and the rising prices is the increased appetite among investors for houses. Rather than buy and flip the properties to new buyers, more investors today are keeping the homes for rental income, according to Redfin. Rental demand has been rising in recent years among would-be buyers who cannot find a place to buy or cannot afford homes in their preferred location.

A record 18.2 percent of all home purchases were made by investors during the third quarter of 2021, according to a new report by Redfin. That was up from 16.1 percent during the second quarter of 2021 and up 11.2 percent from the third quarter of 2020.

The number of homes purchased by investors — 90,215 — during the third quarter of 2021 represents an 80.2 percent increase in the number of investor-purchased homes during the third quarter of 2020. Most investors — 76.8 percent — purchase homes with cash, which makes it difficult for traditional buyers to compete. Investors primarily purchased single-family houses, which made up 74.4 percent of all investor purchases, compared with 16.9 percent condos and co-ops, 5.4 percent townhouses, and 3.4 percent apartments or duplexes.

The highest share of home purchases by investors was in Atlanta, where nearly one-third (32 percent) of homes were sold to investors during the third quarter of 2021. The other metro areas with the highest investor shares were Phoenix (31.7 percent), Charlotte (31.5 percent), Jacksonville, Fla. (28.3 percent), and Miami (28.1 percent).

Metro areas with the lowest share of investor purchases were Providence, R.I. (5.4 percent), Montgomery County, Pa. (7.1 percent), Virginia Beach (7.1 percent), Washington, D.C. (7.2 percent), and Warren, Mich. (7.4 percent).

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