Investors bought more single-family homes than ever in 2Q

With extreme home price growth in the past year, investors couldn’t help but take advantage of the situation.

Investors — any institute or business that deals in real estate — bought 67,943 homes in the second quarter, a surge from 59,017 in the first quarter and 32,873 the year before, according to Redfin. Those purchases amounted to $48.5 billion, up from $38.9 billion quarterly and $20.9 billion annually, though many investors pulled back during the pandemic’s early stages.

Investor-owned units make up 15.9% of all U.S. properties, an increase from 14.8% in 1Q, 10.2% a year ago and just below the record of 16.1% in 2020’s first quarter. The rise of housing values basically guarantees strong returns, especially if the investor has access to cheap debt, Redfin Senior Economist Sheharyar Bokhari said in the report. A 74% share of these investments were cash purchases, driving the already intense competition higher.

"With investors throwing money at the housing market, some home buyers are finding it tough to compete," Bokhari said. "Investors frequently pay with all cash, which means they often have a much higher chance of winning bidding wars than buyers who take out mortgages."

Investors bought 26.5% of multifamily homes, 16.1% of single-family properties and 15.1% of condos that sold in the second quarter. The most activity came at the bottom end of the market as investors bought 21.2% of the quarter’s low-priced properties compared to 13.8% mid-priced and 13.5% high-priced. This aligns with the rapid growth among starter home values relative to more expensive housing.

"Investors are also taking advantage of surging demand in the rental market,” Bokhari said. “With so many Americans priced out of homeownership, investors can turn an easy profit by buying up properties and renting them out."