US Real Estate Market Shifts as Small Investors Take the Lead
Independent property investors garner significant market influence, currently accounting for a staggering 59% of investor purchases in the sector.
The US real estate market is poised for a significant shift, as revealed by industry expert insights.
According to a recent study by Realtor.com, small real estate investors made a significant impact on the market last year. Data showed that these investors accounted for 59% of all investor home purchases, which was the highest share in history for entities purchasing ten or fewer homes.
The number of homes acquired by small investors increased by 3.7% year-over-year, reaching 361,900 in 2024. Meanwhile, large investors, those buying at least 50 homes, saw their share of investor purchases reach the lowest level in 17 years, with a 21.7% share.
Investors, in general, made up 13% of home purchases in 2024, slightly more than in 2023. This rising presence of investors in a smaller market, according to Realtor.com, signaled a shift towards smaller-scale investing.
Interestingly, the report indicated that investors resorted to debt more frequently last year to fund their real estate investments, with cash purchases dipping to 62.3%. States such as Missouri, Oklahoma, and Kansas saw the highest percentages of home purchases by investors in 2024.
On the flip side, investors sold 10.8% of homes that transacted in the US in 2024, marking the highest share on record of more than two decades that Realtor.com has been tracking.
This change in the real estate market comes as the housing market adjusts from the pandemic-era frenzy, with inventory levels improving, home price growth leveling off, and rents easing. In May, the US boasted over 1 million active listings, an 8% increase from the previous month and a 31.5% surge from a year ago.
The median asking price for homes was $440,000 in May, marking a continued upward trend in property values. However, this shift towards small investor dominance could potentially alleviate competition for entry-level buyers, who often face stiff competition from investors.
As per Daniellie Hale, chief economist at Realtor.com, these investor trends signal a transition. "Nationwide, investors picked up more homes on net in 2024, as smaller investors were a growing majority of investor buyers," she said. "But with investor selling at a new high, the market saw the smallest net investor buying activity in five years, lessening one of the notable headwinds for entry-level buyers who often compete with investors."
These investor trends could be a positive development for the US housing market, offering relief to entry-level buyers and potentially leading to a healthier long-term growth trajectory. Nevertheless, close monitoring of investor behavior will be necessary to fully understand the implications of this shift in the US real estate market.
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- Small real estate investors, who accounted for 59% of all investor home purchases in 2024, are playing a significant role in shaping the US real estate market.
- The increasing number of homes acquired by small investors, coupled with a decrease in large investor purchases, indicates a shift towards smaller-scale investing in the US real estate market.
- Investors resorted to debt more frequently in 2024 to fund their real estate investments, as cash purchases dipped to 62.3%.
- The rise of small investor dominance in the real estate market could potentially alleviate competition for entry-level buyers, who often face stiff competition from investors.
