After a Pandemic Pause Investors Are Back To Buying US Homes

New home sales never really slowed during the pandemic, with urban single-family housing seeing the fastest price growth—up 20% year over year. Now, with the economy reopening, institutional and business investors jumped back into the house market for the first time in a year, according to home real estate site Redfin.

According to the site, investor purchases saw growth for the first time since the pandemic hit. Investments were up 2.7% year over year in the first quarter of 2021. That’s the first after three quarters of declines as high as 45.5%, which happened in the second quarter of 2020.

The commercial and institutional investors snapped up 14.9%, or roughly one in seven, of all home sales. Such investors are holding close to the 16.1% of all homes they held in the first quarter of 2020.

Investor purchases of single-family homes were up 4.8% in Q1. In comparison, investments in condos were up only 0.9% and fell 3.6% for townhouses and 11.6% for multifamily. The probable cause was families moving to homes for space and distance from others. Investment in higher-priced homes grew 19.8%, with mid-priced home sales up 12.7% and low-priced homes down 9.2%.

“Investors are likely starting to feel more comfortable because the economy is in recovery mode,” said Redfin senior economist Sheharyar Bokhari. Another reason Bokhari offered was that the shortage of homes, and the larger number of families renting, is a way to invest cash on hand and then rent out the properties to gain ongoing revenue. “This is likely making the housing shortage even worse, and also means that individual homeowners sometimes end up competing with investors in bidding wars,” Bokhari added.

Redfin chief economist Daryl Fairweather also pointed to an overheated stock market. The price to last twelve months earnings per share ratio for the S&P 500 in the first quarter of 2021 was a multiple of 40.8. That is by far the highest it’s been since the dot com collapse, according to data from S&P CapitalIQ.

Fairweather thought that investors might be shifting from stocks to houses as “a relatively safe bet.”

“We’ve seen a lot more international inflow and institutional inflow of capital,” Joel Sanders, founder of Nashville-based apartment location service Apartment Insiders, tells GlobeSt.com. “Also, it takes less capital to buy a single-family rental and the mortgage rates are favorable.”

According to Redfin, investors put the brakes on their housing investments at the start of the pandemic because “the housing market had ground to a halt,” with rents plunging and eviction moratoriums from the CDC and some states. They were also slower to return.