Are Real Estate Investors Making It Harder to Buy Homes?

If you're feeling the pinch of skyrocketing housing prices, you're not alone. Many consumers are quick to point the finger at real estate investors, claiming they make homeownership nearly impossible. However, while the housing market is complex and multifaceted, experts argue that it’s tough to blame investor activity entirely.

Investor Activity on the Rise

According to Redfin, real estate investors bought around 44,000 homes in the U.S. during the first quarter of 2024. This marks a slight 0.5% increase from the previous year, indicating a renewed interest from investors. These buyers typically purchase properties to rent out or resell, rather than to live in.

Who Are These Investors?

Investors encompass institutions or businesses using limited liability companies (LLCs) or trusts to acquire homes. In Q1 2024, investors accounted for 19% of home purchases, meaning a whopping 81% were bought by individuals likely seeking primary residences. Interestingly, large institutional investors own just about 1% of the total U.S. housing stock¹.

Impact on Homeownership

A report by Moody's Analytics explored the relationship between investor activity and homeownership rates. The findings? There’s a weak correlation between the two, suggesting investors aren’t significantly crowding out traditional homebuyers.

Chen Zhao, a senior economist at Redfin, emphasized that determining investors' impact on the market is far from straightforward. Seasonal factors and fluctuating mortgage rates also play significant roles in investor activity.

What This Means for Buyers and Renters

For homebuyers, competing with investors is another challenge on top of an already tough market. But it's essential to consider what investors do with these homes. Many rent out single-family homes, which can be a plus for renters by boosting the rental supply. Additionally, some investors buy and renovate uninhabitable properties, adding more livable homes to the market.

In conclusion, while real estate investors are a notable presence in the market, their overall impact on homeownership is nuanced and complex. So, before pointing fingers, it’s important to consider the bigger picture.