Mom-And-Pop Investors Take Over The Market

Institutional investors are cooling on the housing market, putting cash purchases on the back burner where they used to dominate.

The share of investors buying homes with cash fell to 64% in Q1 2024, Realtor.com found, its lowest point since 2008 and down from 69.7% in Q4 202.

The reason? Mom-and-pop investors are increasing their market share. Small investors (those that purchased ten or fewer homes since 2001) made up 62.6% of investor purchases from January to March 2024. That’s the highest share since 2001, when Realtor.com began collecting this data.

Small investors are far more likely to use financing– a boon for homebuyers hoping to outbid them and mortgage lenders alike.

“It’s better for everyone involved that institutional money is withdrawing from the single-family home space. It creates less artificial demand among buyers, therefore reducing some upward pressure on prices. It also leaves room for mom and pop investors to operate,” G. Brian Davis, a real estate investor and co-founder of property management software SparkRental, told Realtor.com.

Of the 100 largest metros, investors paying all cash were most common in Portland-South Portland, ME (81.3%), Albuquerque, NM (81.2%), Toledo, OH (80.5%), McAllen-Edinburg-Mission, TX (79.5%), and Ogden-Clearfield, UT (79.0%).

“All-cash investor purchases are more common in relatively low-priced areas and areas popular for second homes/vacation homes,” Realtor.com senior economist Hannah Jones noted. 

Since mortgage rates spiked, cheap homes are a major draw. Investors bought 26% of America’s lowest-priced homes in Q4 2023. By comparison, they bought 13.6% of mid-priced homes that sold and 15.9% of high-priced homes.

Investors caused real headaches for buyers in 2021 when rates were super low. In metro Atlanta between July 2021 and June 2022, for example, one in three homes was sold to an investor.

“At one point in my life, I was a first-time homebuyer, so I’ve had a lot of sympathy for a lot of these first-time homebuyers that were being completely shut down by investors coming in and paying cash,” Cory Ure of SecurityNational Mortgage Company in Salt Lake City told The Mortgage Note.

This change in dynamic could open more homes to competition between investors and normal homebuyers, giving the everyman an opportunity to win– a luxury not afforded to buyers when large investors steamroll them.