IMPACT OF INSTITUTIONAL BUYERS ON HOME SALES AND SINGLE-FAMILY RENTALS

IMPACT OF INSTITUTIONAL BUYERS ON HOME SALES AND SINGLE-FAMILY RENTALS

IMPACT OF INSTITUTIONAL BUYERS ON HOME SALES AND SINGLE-FAMILY RENTALS

IMPACT OF INSTITUTIONAL BUYERS ON HOME SALES AND SINGLE-FAMILY RENTALS

IMPACT OF INSTITUTIONAL BUYERS ON HOME SALES AND SINGLE-FAMILY RENTALS

IMPACT OF INSTITUTIONAL BUYERS ON HOME SALES AND SINGLE-FAMILY RENTALS

IMPACT OF INSTITUTIONAL BUYERS ON HOME SALES AND SINGLE-FAMILY RENTALS

IMPACT OF INSTITUTIONAL BUYERS ON HOME SALES AND SINGLE-FAMILY RENTALS

IMPACT OF INSTITUTIONAL BUYERS ON HOME SALES AND SINGLE-FAMILY RENTALS

​​​​​​​John Reilly
October 21, 2022
5 min

 

For complete report and slides:

https://cdn.nar.realtor/sites/default/files/documents/2022-impact-of-institutional-buyers-on-home-sales-and-single-family-rentals-05-12-2022.pdf

 

 

Objective of the Research
 

The home sales and rental markets continue to suffer from a huge undersupply of both for-sale and for-own units. As of March, the inventory of existing-homes on the market was equivalent to just two months of supply, well below the desired level of six months. The median existing-home sales price continues to increase at a double digit pace of 15% year-over-year. At the same time, asking rents on multifamily properties are up 11% year-over-year as of March1 while rents on single-family properties are up 13% year-overyear as of February.2 Low interest rates during 2020-2021, with the 10-year T-note hovering at below 2% in 2020 and 2021, have led investors to seek higher returns elsewhere, and real estate is one such asset.
 

In March 2022, inflation surged to 8.5%, creating further incentive for investors to seek assets that offer a hedge against inflation, such as residential rentals where rents are adjusted annually. These conditions have made the real estate market attractive to institutional investors seeking to purchase properties to turn into rentals.
 

This study estimates the market share of institutional buyers to total home sales using property deed records from Black Knight and compares the median price of institutional buyers to the median price of all buyers. It looks at the factors that attract institutional investors to a particular market using data from the American Community Survey. It analyzes the motivation for home sellers to sell to institutional buyers, the impact of institutional investors on home prices and rents, and the quality of service offered by institutional landlords relative to “mom-and-pop” landlords based on a survey REALTORS®.


KEY FINDINGS
 

Key Finding 1: Institutional buyers made up 13% of the residential sales market in 2021, with the median purchase price of institutional buyers typically 26% lower than the states’ median purchase prices.
 

Key Finding 2: Institutional buyers tend to purchase in markets with rising household formation, strong housing and rental markets, high income markets, but also with a high density of minority groups especially Black households, with twice as many Black households in markets with higher share of institutional buyers.
 

Key Finding 3: According to REALTORS®, institutional investors have a larger market presence due and offer cash and services that home sellers prefer. However, their offer price is about the same as noninstitutional buyers and they offer the same or faster service than mom-and pop landlords
 

For complete report and slides:

https://cdn.nar.realtor/sites/default/files/documents/2022-impact-of-institutional-buyers-on-home-sales-and-single-family-rentals-05-12-2022.pdf

 

 

John Reilly

John, a real estate educator and attorney, is one of the foremost writers of real estate materials, which include 10 books, and numerous articles. His national best seller, “The Language of Real Estate” is in its eighth edition, selling over 150,000 copies and published by Dearborn Publishing.

Contact: John@RealTown.com
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