Single-Family Investor Activity Surges in the Second Quarter

Single-family home investment experienced a summer surge in 2021, making up for the irregular patterns created since the pandemic, CoreLogic reported.

In May and June, investors made nearly a quarter of all purchases. Some bounce-back in investor activity was expected as the pandemic dampened, but a rise in the summer months is something that has not been seen in the past 10 years.

Large investors (those who retain 100 or more properties) are largely responsible for this rise. Of all investor purchases made in June 2021, 20% were made by large investors. This is much higher than 11% in 2020 or 14% in 2019. 

Small investors (those who retain between 3 and 10 properties), have declined slightly and now account for less than half of investor purchases at 46% in June. Mid-sized investors (those who retain 11-99 properties) have stayed constant, oscillating around 35% percent in the past 30 months. The pandemic seemed to drive away large investors, but they are now making up their largest share of investor purchases seen in the past decade.

Investors Swing to Top- and Middle-Third Sales Prices

Another unprecedented trend is that investors are showing greater interest in homes in the top and middle third of sales prices in their respective metropolitan areas. There, they were purchased by investors 21% and 23% of the time in June 2021, respectively. This is up from 11% for both tiers in June 2020. Low price tiers have seen an increase too, though it is less extreme, from 18% to 26% from June 2020 to 2021.

This compares, historically, to investor presence being heaviest in lower priced homes, and while this remains the case, their share in higher price tiers of markets has seen the starkest increase throughout 2021.

South and Midwest Are Most Desired Markets

Investors are focusing their attention on the South and Mountain-West and limiting their activity in the Northeast. Of The 10 MSAs with the highest investor shares, seven of these are in the South, and the other three in the Mountain-West. They rank as follows: Memphis, Atlanta, Lubbock, McAllen, Brownsville, Phoenix, Beaumont, Salt Lake City, Boise, El Paso.

Investors are likely more attracted to locations where tenant rights laws are more favorable for landlords, have high population growth and high house price growth. 

Of the bottom 10 MSAs, eight are in the Northeast, the exception being two areas in Louisiana, where it is likely that low levels of economic and population growth are signaling to investors that demand will be low.