A study found investors help local buyers by selling property if rents stagnate and home prices rise – but hurt homebuyers if rents are rising and home prices are not.
SANTA CLARA, Calif. – In two out of five U.S. metro areas, buyers are being helped by real estate investors who have decided it’s a good time to put their homes on the market. In the other three out of five metro areas, however, investors more often compete with buyers for the same properties.
According to the latest Realtor.com Investor Report, investors largely make decisions based on the best way to maximize profit. As a result, metro areas with stagnant rents but rising home prices tend to see more investors decide it’s time to list a property, giving local homebuyers more options. In areas where the opposite is true, however – rents are rising but local home prices are relatively stagnant – more investors are competing against homesteading buyers for homes listed for sale.
According to the data, investors exacerbate the inventory shortage in 31 of the top 50 U.S. markets, but in roughly 19 markets – including Atlanta, Dallas, Baltimore, Los Angeles and San Francisco – they’re helping to replenish the number of homes for sale.
In the four Florida metro areas that make up part of realtor.com’s top 50 cities, investors appear to be hurting inventory more than helping, however.
According to realtor.com’s breakdown of the top 50 U.S. markets, four Florida metro areas tend to see more investor-buyer competition for listed properties, with investors taking more homes out of inventory than they’re putting in.
“Today’s buyers are facing a tough market and data shows they aren’t just competing with each other. With deep pockets and more flexibility, investors can be daunting competition for the typical homebuyer,” says Realtor.com Chief Economist Danielle Hale. “Right now, data shows investors are buying more homes than they are selling,” but “it’s worth remembering that they can also contribute to inventory levels.”
Hale says investor appeal depends on many factors, but, “The higher rents are compared to home prices, the more attractive the market is to investors looking to buy homes and convert them into rental properties.”
Realtor.com looked at the number of home sales and home buyers that investors made in a specific market. If the number of home sales outweighed the home buyers, it generated a positive number showing investors made the market better for homesteading buyers. If the number was negative, however, it meant investors bought more homes than they sold.
Investors added to the number of homes on the market in 19 of the 50 largest U.S. metros, with Atlanta (+399 homes), Dallas (+239 homes), Baltimore (+188 homes), Los Angeles (+112 homes) and San Francisco (+93 homes) at the top of the list.
Investors snatched up homes in smaller markets with higher inventory levels in 31 of the largest U.S. markets, led by Phoenix (-429 homes), Charlotte, N.C. (-287 homes), Miami (-256 homes), Tampa (-224 homes) and Chicago (-221 homes).
The markets where investors compete with home buyers tend to have relatively more homes available – 3.7 properties for every 1,000 residences versus 2.8 in markets where investors are adding to inventory.
Florida metro area investor impact in realtor.com study
- Jacksonville: Listings down by 144 due to investor activity
- Miami-Fort Lauderdale-West Palm Beach: Listings down 256 due to investor activity
- Orlando-Kissimmee-Sanford: Listings down 151 due to investor activity
- Tampa-St. Petersburg-Clearwater: Listings down 224 due to investor activity
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