Posted on 07/22/2025 9:41:35 AM PDT by delta7
Investors continue to snap up residential properties, as real estate has evolved into an investment class of its own. New reports show that between 2020 and 2023, investors were responsible for 18.5% of home purchases. In the first three months of 2025, investors composed 27% of all residential properties, marking the highest share in half a decade, according to BatchData.
High mortgage rates, coupled with high property values, have caused many would-be buyers to reconsider their purchases. Investors have fewer constraints, leading to the purchase of 265,000 residential properties during Q1, or a 1.2% YoY rise. However, we are seeing a decrease in institutional investments in real estate. The big money is not looking at real estate in this environment. Although investors accounted for 1.2 million homes in 2024, only 20% of the 86 million single-family homes in America are investor-owned.
Mom-and-pop investors who own between one and five homes purchased 85% of all investor-owned residential properties, with those owning between six and ten properties securing 5% of the market. Institutions owning 1,000 or more properties account for only 2.2% of investor-owned homes.
Purchasing real estate amid record-low rates was a no-brainer for investors, and institutions in particular, who had the liquidity to outbid competitors with cash offers. As interest rates rise, the cost of financing becomes prohibitive even for institutions. Institutions rely on leverage to enhance returns, and when borrowing costs rise, the math simply doesn’t work anymore. Real estate is an illiquid asset. In a world moving toward capital controls and rising geopolitical tensions, institutions are reallocating toward assets with more mobility. Capital is no longer looking at real estate as a long-term store of value. It’s moving into tangible assets that are more liquid—commodities, energy, gold, and equities.
The available real estate inventory is at its highest level since the pandemic, but the sector has become stagnant as homes sit on the market for far longer. So while institutions have the capital, interest rates aside, they are not looking at mere rental or flipping income. People investing in real estate in this environment are seeking a modest additional income.
Institutions are not interested in buying and holding tangible assets in a volatile environment where returns are not guaranteed. Look at New York City, for example—people are fleeing ahead of an incoming socialist local government that has promised to raise taxes on top earners.
Real estate is no longer the safe bet it once was due to a lack of confidence in future regulation.
“Another 2008 event on the horizon? Business cycles never ever change.”
Closer to the 2015 event you predicted and never happened!
I found that small paragraph enlightening. It gives me a better perspective of who the investors are when we talk about investors buying real estate.
Me too.
But it also makes me less confident that big guys like Blackrock, Vanguard, etc…. will prevent a collapse of residential real estate by being“too big to fail”. These mom and pop investors who make up 85% of the market have no institutional pull.
Breaking news! (from about 18 months ago)
Agreed—I had not seen those numbers before.
That should mean less volatility in most markets.
IMHO that's a good thing. If the real estate market collapses we'll see houses selling for their intrinsic values (how much they're worth to the consumers) instead of their investor market value (how you can sell it to the next investor in the tulip mania).
The bubble popped a while ago. Everyone was too Epsteined up and Alligator Alcatrazed to hear anything else. The media doing its best worst.
You still have to pay insurance.
You still have to pay property taxes.
You still have to find ethical renters.
The last one is getting more difficult.
So the circling sharks back away . . . waiting for the decline of capital gains taxes.
“You still have to find ethical renters.”
Ethical renters still have to find ethical Landlords.
There are lots of reliable working folks that want to rent a safe home, in a safe neighborhood. They aren’t rich but can afford a fair rent. They can’t afford to buy, nor the “First Time Investor” keystone markup that many Landlords are seeking.
Longtime rental-property owners know the value and the kind of stable income stream a quality tenant brings to Real Estate investments.
Have had some 15+ year tenants.
Every area and deal is unique.
Some markets like Austin have already corrected from their 2021-2022 highs.
Especially with the national home builders in that market.
Places in Florida are also correcting from their Covid boom highs.
This is also having a direct effect on the northeast and upper midwest. There are no enough houses in New England and around Chicago for the demand.
Places like here in NH continue to be a sellers market. There is just not enough supply of homes. Prices continue to go up slowly 6-8% annually. Manchester/Nashua, NH is one hottest markets in the country.
Places like Chicago there are not enough houses to keep up with demand.
Yet, BOOM towns like Denver. SLC, Phoenix, Boise are correcting.
Even Dallas/Fort Worth is no longer the biggest volume new home start market in the country. Houston has now taken the number one spot.
NYC is now the #3 spot for starts/permits in the country.
Lots of people that moved during covid are moving back to where they came from. Maybe they weren’t cut out for TX & FL summers.
Phoenix and LA including the valley are still growing, but not as fast as they were. These and the Florida markets are where the big investors like Blackrock and Invitation homes have backed off. The big investors think real estate is technically overpriced. That is why they are not buying. Some are selling or have sold already in places like Austin.
Orlando is now in the top ten housing market in the country.
That is because a lot of people are moving from the beach inland. Most people cannot afford the insurance on the coasts of Florida anymore.
IATG
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