Real estate investors bought 80,293 properties in Q4 2021, a record 18.4% of homes sold.
Redfin reported that investor purchases were up from 43.9% YOY, though they fell 9.1% from Q3’s peak, likely due to stock shortages that impacted regular homebuyers and investors alike.
Seasonality also contributed to the quarter-to-quarter drop, as the housing market typically slows in the winter.
More than three-quarters of homes bought by investors (75.3%) were all-cash purchases.
Atlanta saw the most investor activity in Q4 at 32.7% of market share, followed by Charlotte (32.1%), Jacksonville (29.8%), Las Vegas (29.2%), and Phoenix (28.4%). These are all popular destinations for moving Americans and have seen high demand during the Great Migration.
“While record-high home prices are problematic for individual homebuyers, they’re one reason why investor demand is stronger than ever,” said Redfin economist Sheharyar Bokhari.
“Investors are chasing rising prices because rental payments are also skyrocketing, incentivizing investors who plan to rent out the homes they buy. The supply shortage is also an advantage for landlords, as many people who can’t find a home to buy are forced to rent instead. Plus, investors who ‘flip’ homes see potential to turn a big profit as home prices soar.”
Single-family homes dominated, accounting for 74.8% of investor purchases, while interest in condos, co-ops, and multifamily properties saw declines from the year prior.
Low-priced homes made up most investor purchases (37%), though the purchase of mid-priced homes hit a record high (32.3%). High-priced homes accounted for 30.7% of investor purchases, down slightly YOY.
“Investors buying up a record share of for-sale homes is one factor making this market difficult for regular homebuyers,” Bokhari said.
“It’s tough to compete with all-cash offers, and rising mortgage rates have a smaller impact on investors because they often don’t use mortgages at all. If home-price growth slows in the coming year, investor demand may cool down because rental price growth will slow, too.”
Monthly rent growth slowed to a nearly-flat 0.1% in January but remains elevated. Typical rent in the U.S. is now $1,856.
But home prices keep growing even as mortgage rates topped 4% last week. Median asking price hit an all-time high of $376,000 recently, while the typical monthly mortgage payment rose to a record $1,931.
There are now 481 U.S. cities where the average home is worth $1 million or more, and an additional 49 cities could make the list by mid-2022 if home appreciation continues at its current rate.
Rental property trends have been under the microscope as the housing affordability crisis continues to evolve. Zillow came under fire last year for selling 2,000 homes to an investment company after closing its iBuying arm rather than putting them on the traditional market.