Home purchases by investors rose 2.7 percent year-over-year in the first quarter, marking the first period of growth since the pandemic began, according to a recent Redfin report. It follows three consecutive quarters of declines, when investor purchases dropped by as much as 45.5 percent.
Investors bought about 1 of every seven homes (14.9 percent) in the first quarter, up from the prior three quarters, when they bought closer to 1 in 10 homes. Investor market share is just shy of the 16.1 percent level in the first quarter of 2020.
“Investors are likely starting to feel more comfortable because the economy is in recovery mode,” Redfin Senior Economist Sheharyar Bokhari said in a release. “They also may be jumping back in because they see the intensifying shortage of homes for sale as an opportunity. With so few houses on the market, many families are resorting to rentals. Flush with cash, investors are able to snap up the homes that are available, and then turn around and rent them out to folks who can't find a home or are priced out of homeownership. This is likely making the housing shortage even worse, and also means that individual homeowners sometimes end up competing with investors in bidding wars.”
A frothy stock market is another factor that might be attracting more investors to real estate, Redfin Chief Economist Daryl Fairweather said.
“Investors may shift away from stocks and toward housing because housing is a relatively safe bet,” Fairweather said. “There aren't a lot of safe bets out there right now.”
Investor purchases of single-family homes rose 4.8 percent year-over-year in the first quarter, compared with a .9 percent rise in condos. Investor purchases fell 3.6 percent for townhomes and 11.6 percent for multifamily properties. This is probably because homeowners prioritized space and privacy during the pandemic, according to Redfin.
Investor purchases of high-priced homes jumped 19.8 percent year-over-year, compared with 12.7 percent for mid-priced homes. The purchase of low-priced homes declined 9.2 percent. That is in line with the fact that the demand for second homes more than doubled during the pandemic.
In Miami, nearly a quarter (23.8 percent) of homes that sold in the first quarter were purchased by investors, the highest share of the metro areas analyzed by Redfin. Next came Atlanta (22.2 percent), Jacksonville, Fla. (22.1 percent), Charlotte, N.C. (21.5 percent), Las Vegas (19.7 percent) and Phoenix (19.7 percent).
In San Jose, Calif., investor home purchases rose 44 percent year-over-year, the largest jump in any metro Redfin analyzed. Next came Detroit (up 33.8 percent), Chicago (up 27.2 percent), Riverside, Calif. (up 24.5 percent), Oakland, Calif. (up 24.4 percent) and Seattle (up 23.3 percent).
Investor purchases fell the most in Pittsburgh, sinking 75.7 percent year-over-year. The second-biggest drop was in Cleveland (down 44 percent), followed by Philadelphia (down 29.9 percent), New York (down 28.7 percent), West Palm Beach, Fla. (down 24.6 percent) and Nassau County, N.Y. (down 22.1 percent).
Read the full report here.