Investor-Owned U.S. Homes Hold Strong in 2023

Discover how investor-owned properties continue to dominate the American housing market, with a look at the latest trends and statistics in 2023. A comprehensive analysis awaits you in this insightful article.

In recent years, the share of investor-owned homes in the United States has remained remarkably high. According to data provider CoreLogic, investors accounted for 27% of all single-family home purchases in March 2023. As summer rolled around, that number only saw a minor dip to 26%, illustrating the continued strength of investor activity in the housing market.

The surge in investor activity began in 2021 and has since held steady, with investors consistently maintaining a market share that is 8 percentage points higher than in 2020. Despite a slight decline in investor purchases since early 2023, there are no indications that the share will fall back to its pre-pandemic level anytime soon.

One possible explanation for the recent drop in home investor purchases is seasonality. As the summer months approach, owner-occupied buyers tend to become more active in the market. This shift in demand could account for the slight decrease in investor activity, but overall, the market continues to favor investors.

To gain a comprehensive understanding of the investor share, it is important to examine the number of transactions rather than solely focusing on percentages. In April, May, and June of 2023, home investors made 85,000, 98,000, and 82,000 purchases, respectively. While there was a decline of 90,000 purchases between the first and second quarters, it is crucial to compare these figures to 2019 for a clearer perspective.

In 2019, the numbers for the same months were significantly lower, with investor activity seeing an increase of more than 43,000 purchases. In contrast, non-investors made 392,000 fewer purchases in Q2 2023 compared to Q2 2019. These stark differences highlight the significant changes that have taken place in the housing market in recent years.

As the total number of investor purchases declines, smaller investors are gradually increasing their market share. CoreLogic's data reveals that mega-investors (those owning 1,000 or more properties) and large investors (those owning 100 to 999 properties) have held market shares of between 8% and 10% each month throughout 2023. This marks a drastic decline from the peak of 17% recorded in June 2022 for mega-investors.

Medium investors (those owning 10 to 99 properties) also experienced a modest decrease in activity, dropping from 37% to 35%. Interestingly, typical housing market investors are increasingly operating on a smaller scale, with those owning three to nine properties accounting for 47% of investor purchases in June 2023. This represents the highest level since 2011.

During the second quarter of 2023, large and mega-investors displayed muted activity. Mega-investors made between 7,000 and 9,000 purchases per month in April, May, and June, similar to the figures recorded prior to the investor surge in 2021. Small investors, on the other hand, made 38,000, 46,000, and 38,000 purchases during the same period, indicating a decline from previous years but still surpassing 2019 and 2020 levels.

The decline in home-flipping activity observed in the second half of 2022 has also contributed to the changes in the market. Only 12% of investors who purchased a home in December 2022 resold the property by the end of June 2023. While this share is lower than in prior years, it represents a slight increase from the 11% recorded three months earlier. This suggests that the decline in home flips may have reached its bottom, as home prices gradually recover.

There is evidence to suggest that the flipping rate could rise in the near future, as iBuyer purchases have seen a slight uptick in recent months. Although iBuyers accounted for just 0.7% of all home investor purchases in June 2023, subsequent months saw an increase to 1.4%. This shift is likely a result of rebounding appreciation, and it could potentially foreshadow an overall increase in the flip rate.

Geographically, home investor shares were primarily concentrated in Western, Southern, and lower Midwestern states during Q2 of 2023. California took the lead with a 34% investor share, closely followed by Washington, D.C. (33%), Georgia (32%), New Mexico (31%), Texas (31%), Nevada (30%), Utah (29%), Arizona (29%), and Kansas (29%). The significant gain of Washington, D.C. relative to its neighboring states of Virginia (23%) and Maryland (22%) is particularly noteworthy.

Despite the usual summer dip in home investor activity, there are no indicators suggesting a regression to pre-pandemic levels of less than 20%. Elevated interest rates and slowing appreciation have dissuaded large and mega-investors, but small investors continue to step in to fill the gap. With inventory levels remaining constrained and owners reluctant to sell due to favorable refinancing rates obtained during the pandemic, small investors have found opportunities in the rental market.

Rising demand for rental properties has led to increasingly unaffordable rental rates, thus incentivizing investors to remain relatively active in the market compared to owner-occupied buyers. This trend, coupled with the gradual recovery of home prices, is likely to sustain the current levels of investor activity in the housing market.