Record Single Family Investor Buying in Q1, Possible evidence of Slowdown in Q2

Some comments from Ivy Zelman on "Non-Primary" Buyers

Previously we’ve discussed the possible impact of investors on the housing market.

Lately we’ve seen some anecdotal evidence that investors are reducing purchases. For example, in their June survey, Rick Palacios Jr., Director of Research at John Burns Real Estate Consulting noted homebuilders saying, “investor sales have stalled”.

However, as recently as Q1, investors were still very active according to CoreLogic: Single-Family Investor Activity Bounces Back in the First Quarter of 2022

Housing economist Tom Lawler discusses the CoreLogic data: CoreLogic: Share of SF Homes Purchased by Investors Hit Record High in Q1/2022; Non-Investor Home Purchases Down Significantly YOY

In its quarterly report on “investor” home buying activity, CoreLogic reported that SF homes purchased by “investors – defined as entities (individual or corporate) who retained at least three properties simultaneously within the last 10 years – increased to a record high of 27.6% in the first quarter of 2022, up from 24.8% in the fourth quarter of 2021 and 19.2% from the first quarter of 2021.

The second graph shows total single family home purchases by investors:

 The report broke down purchases by investors by the number of properties owned by the investor: “small” (3-10), “medium” (11-100), “large” (101-1000), and “mega” (>1000).  Below is a table showing home purchases by various categories from Q1/2019 to Q1/2022.

Single Family Home Purchases by Type of Buyer (from CoreLogic Property Records Database)

(Note:  Purchases by investor category derived from share data; totals may not add up due to rounding).

The surge in SF home purchases by investors that began in the second quarter of 2021 is striking, especially considering that national home prices were already showing double-digit YOY gains BEFORE the investor purchase surge.

The addition of the “mega” investor purchase category to this report also provides interesting insights to the timing of purchases by very large investors.  Note that SF home purchases by mega investors over the 12 months ending this March were almost double the number of such purchases in 2019 and 2020 combined!  This report belies the notion from some institutional SF rental trade groups that “large” investors have played only a minor role in the housing markets, especially considering that “mega’ investor purchases were concentrated in southeast and southwest areas of the country.

It is also quite interesting that the number of SF homes purchased by non-investors in each of the last three quarters showed double-digit YOY declines, with Q1/2022 non-investor purchases down 15% from the comparable quarter of 2021.

In terms of metro areas, the report only showed investors shares for the 10 metro areas with the highest investor shares. 

Q1/2022 Share of SF Homes Purchased by Investors

• Atlanta-Sandy Springs-Roswell, GA 42.67%

• San Jose-Sunnyvale-Santa Clara, CA 40.78%

• Los Angeles-Long Beach-Anaheim, CA 39.81%

• Memphis, TN-MS-AR 39.71%

• Las Vegas-Henderson-Paradise, NV 37.51%

• Phoenix-Mesa-Scottsdale, AZ 36.65%

• San Antonio-New Braunfels, TX 35.09%

• El Paso, TX 34.84%

• Dallas-Fort Worth-Arlington, TX 34.77%

• Charlotte-Concord-Gastonia, NC-SC 34.63%

The report did not show purchases by size of investor for these metro areas, but the author of the report did tell me that there were “a lot” of “mega” investor purchases in Atlanta but that “mega” investors had “virtually no presence” in the California MSAs shown above.

CR Notes: Investors pulling back could be a factor in less housing demand. Housing analyst Ivy Zelman said last week about non-primary buyers (edited slightly for clarity):

We've also looked at public record data, as well as CoreLogic information that we’re aggregating from them and partnering with them, the non-primary, which is what we call it. And we think about non-primary for those that you know, might not appreciate what that includes: second home buyers, private investors, institutional investors and the institutional investors could also incorporate what we call the intermediaries. Liquidity providers; iBuyers. So, there's been tremendous speculation and aggregate that number or the latest sort of first Q - we don't have two Q yet - aggregated to about 24% of transactions, and we think that's even understating it …

[Investors] are the ones that are canceling too, because when I was chatting with the builder in Boise and home prices are up 70%. They're like, “Oh yeah, we're seeing price cuts. We're seeing incentives. We're seeing huge cancellations”. So, when people are cancelling, are they saying why? And this builder said, oh, they're just the investors that you know, realize home prices have peaked. …

[We are seeing less] demand and seasonally worse than normal activity and increasing [cancellations] … And I do think the non-primary is a big factor.

Investor buying (or selling) is something to watch.