Behind the SFR Investor Activity in Q3

The share of single-family purchases by investors continues to creep higher, according to a recent CoreLogic Home Price Index report.

In June, the share of single-family purchases made by investors was 24.3%—a number eclipsed in July, August and September which had rates of 24.6%, 25.8%, and 26.8%, respectively.

Investors in the 2021 real estate market continued their acquisition spree through the third quarter. Much like the record appreciation recorded in the CoreLogic Home Price Index, investor activity hit peaks previously unseen in CoreLogic data in the second quarter of 2021. 

Seasonality Playing a Factor

Non-investor purchases exhibit significant seasonality, making most of their purchases during the summer. Investors are typically less sensitive to the seasons, but usually buy slightly more properties in the summer. 

Focusing on the past year of investor purchases, the total number has dropped in the third quarter after peaking in June. Although their market share is up, whether investor activity increased in the third quarter depends on how it is defined. 

“Given the usual seasonal trends, we can expect to see the investor share increase in winter,” according to the report. “As we move into the spring/summer and owner-occupied purchases pick up, there will be more clarity into how long the recent investor surge will last.”

Share of Large-Investor Buyers Increases

Of all investor purchases made in June 2021, 24% were made by large investors. This is a 4% increase from June, a 12% yearly percentage increase, and a 8% increase from September 2019. In the last quarter, this appears to be coming from mid-sized investors, or those buying 10 to 99 properties.

Small-sized investors decreased in the first half the year but have stayed constant at around 44%.

Investors continued to move away from their historical trend to stick to the lower priced areas within MSAs. Homes in the top- and middle-third of sales prices in their respective metropolitan areas were purchased by investors 23% and 25% of the time in September 2021, respectively.

Share of iBuyers Steadily Increasing

Instant online buyers (iBuyers) are an investor class that has gained attention in the past year. The market share has steadily increased to just under 2% of all purchases, and around 5% of investor purchases from July through September. All iBuyers fall under the category of large investors, so approximately half of the large investor increase over the past year can be attributed to iBuyers.

Another widely covered investor trend is built-for-rent properties. To see what is behind the surge in investor activity, one can look at the share of investor purchases that were new construction. The number of investor purchases made on new construction has increased over the past year, but the rate has stayed the same, oscillating around 10% from 2019 to present. It cannot be said that the built-for-rent model is behind the surge in investor activity seen this year.

Investors Coming Back to California

After a decade of moving away, investors are coming back to California. Of the 11 MSAs with the highest investor shares for the third quarter of 2021, four of these are in California, four in the South and three in the Mountain-West. These are the markets where iBuyers have focused. 

California was prevalent in the top investor shares at the start of the 2010s when there were many foreclosures in the wake of the Great Recession. More recently, the South and the Mountain-West have had the highest investor rates. The California rise is likely due to large investors, who seem less deterred by the high prices found in the area.