With home prices soaring over the past year, investors couldn't help but take advantage of the situation.
Investors – any institution or company that trades real estate – bought 67,943 homes in the second quarter, up from 59,017 in the first quarter and 32,873 a year earlier, according to Redfin. Those purchases totaled $ 48.5 billion, up from $ 38.9 billion quarterly and $ 20.9 billion annually, despite many investors pulling out in the early stages of the pandemic.
Investor-owned shares account for 15.9% of all US real estate, up 14.8% in the first quarter, 10.2% a year ago and just below the record high of 16.1% in the first quarter of 2020. The Rise in property values generally guarantees strong returns, especially if the investor has access to cheap debt, Redfin senior economist Sheharyar Bokhari said in the report. A share of 74% of these investments was made in cash, which increases the already intense competition.
"With investors throwing money into the housing market, some homebuyers are having a hard time keeping up," Bokhari said. "Investors often pay with cash, which means they often have a much higher chance of winning bidding wars than mortgage buyers."
Investors bought 26.5% of the apartment buildings, 16.1% of the single-family homes, and 15.1% of the condominiums that were sold in the second quarter. The strongest activity was at the lower end of the market, as investors bought 21.2% of the quarter's low-priced properties, compared with 13.8% mid-priced and 13.5% high-priced properties. This is in line with the rapid growth in values for starter properties compared to more expensive apartments.
"Investors are also benefiting from increasing demand in the rental market," said Bokhari. "With so many Americans home exempt, investors can make an easy profit by buying and renting real estate."