Making the leap from renting to homeownership has never felt more difficult for many families. Mortgage rates are skyrocketing, single-family homes are in high demand, and major demographic shifts have resulted in flooded suburbs. These factors alone have made it a nightmare for first-time homebuyers. But, another problem has been on the mind of many would-be homeowners, big, shrouded investment companies.
A common perception today is that, more than ever, large, faceless investment companies are purchasing houses en masse and converting them into rental homes. If true, this would mean that large swaths of U.S. homes are being swallowed up, resulting in a more competitive market, fewer available houses, andinflated home prices. In this article, we intend to delve into this myth, look at the hard data, and determine if faceless investment companies are buying out all the single-family homes in America.
Have Big Companies Been Buying More Single-family Homes?
According to datareported by the PEW Trustand originally gathered by CoreLogic, as of 2022, investment companies take up about a quarter of the single-family home market. Specifically, investor purchases accounted for 22% of all American homes in 2022. This number slightly decreased from last year (2021), which sat at 24%, with 90,215 homes in the third quarter alone. Over the last decade, the number of investors purchasing homes has increased from 10% to 15% each year, except for 2020 to 2021, which, according toa study by Redfin, saw an increase of over 80%. So, yes, investment and residential real estate companies are purchasing more and more American homes each year.
How Long Have Investors Been Buying Single-family Homes?
Until the early 2010s, institutional investors in American homes focused mostly on large, multifamily structures like apartment complexes. That all changed during the great recession of 2009. At that time, many single-family houses were purchased on faulty or highly unrealistic mortgages that resulted in foreclosure. As a result, huge swaths of residential homes were sold on foreclosure or at incredibly low-interest rates. Because of that, real estate investors had the opportunity and capital to purchase these properties in bulk. These properties were seen as high-return, low-risk investments since investors could buy them up at low cost, make minor repairs, and resell them once the market stabilized or turn them into rental properties. Since then, single-family homes have been a consistent investment opportunity in many companies’ portfolios.
After the stabilization of the financial crisis, investor interest in the American home market was steadily growing until late 2020. The pandemic was a colossal shift in almost every industry across the globe, and the home market was no different. Homebuyer preferences radically changed from the years before. In previous years, certain demographics (like millennials) flocked to metropolitan areas for work, but once the pandemic hit and the work-from-home trend blossomed, they fled these tech centers for the suburbs. As a result, corporations beganpurchasing and building new homesto keep pace. In 2021, the single-family rental market saw a massive spike, jumping up 40%, with companies like American Homes 4 Rent and Invitation Homes seeing double-digit rent growth.
What Companies Have Been Buying Up All the Single-family Homes?
The one major misconception about the investor-homebuying myth is that big, faceless companies are the largest force in buying houses. While large corporations certainly play a hand in shaping the market landscape, they only made up around 3% of American home sales in 2021 and only 1% in previous years. In reality, most home purchases in the investor space are made by smaller, localized groups. Everyone and their broker are trying to get into the real estate market. Today we see hedge funds, private equity firms, insurance companies, real estate investment trusts, and even mom-and-pop landlords taking a more active interest in rental housing.
When looking at the Wall Street companies buying up homes, you have a small list of corporations that have shaped this growing trend. One of the first companies to make waves in this market is Blackstone. Founded in 1985, Blackstone, or Blackstone Group, is an alternative investment firm based out of New York. Blackstone’s total capital of 2021 sat at $880 billion, over a third of which came from its real estate department. In 2012, Blackstone purchased Invitation Homes, a rental company owning around 80,000 homes. In 2019, Blackstone sold Invitation Homes, only to purchase Home Partners of America in 2021. Since then, Blackstone has been an active powerhouse in the American home market.
Other large companies in the American home market are J.P. Morgan Asset Management, Goldman Sachs, Mynd Management, Pretium, and American Homes 4 Rent. These companies have bought and rented out tens of thousands of single-family homes for the past three years. American Homes 4 Rent, for example, owned over 52,000 homes in 2019, operating in over 22 states, with the largest concentration in Atlanta, Georgia.
Which States Have the Most Investor-sold Homes?
Another misconception of this myth is that homes are being bought equally across the United States. In reality, investment groups are far more focused on carefully monitoring trends that influence relocations, where those relocations bring homebuyers, and then purchasing homes in those areas. As such, areas with heightened economic growth are seeing the most interest from these investment companies. Specifically, states along theSun Belt and Southeastern Coastlinehave seen the most home purchases. Certain states saw particularly massive jumps in activity, with Florida, California, and Arizona doubling their amount of investor purchases from 2020 to 2021.
Here is a quick rundown of the top 10 states with the highest investor share of sold homes in 2021 (Data provided by The Pew Charitable Trusts, CoreLogic, and Stateline):
Position
State
Percentage of Homes Sold by Investors in 2021
1
Georgia
33%
2
Arizona
31%
3
Nevada
30%
4
California
29%
5
Texas
29%
6
Utah
27%
7
Idaho
26%
8
Indiana
26%
9
Missouri
26%
10
New Mexico
26%
Besides burgeoning business, there are other appealing aspects tostates in the Sun Belt, such as lower property taxes, more lenient laws regarding landlord and renter relationships, and fewer housing market regulations. Furthermore, many of these states have less restrictive laws regarding rent increases, evictions, zoning, or landlord responsibilities, making them an appealing choice for corporate investors. Combine this with the recent increase in relocation to the Sun Belt and East Coast, and it can be easy to see why corporations would be investing in home rentals in these states.
Closing Thoughts
Unfortunately, the belief that corporations are buying up all the homes in America and raising housing prices holds some truth. However, not all aspects of the myth are true. For example, not all states are affected equally, and thesecorporations greatly favor single-family or starter homesover larger houses. However, there has undoubtedly been an increase in the number of homes bought and sold by investment groups over the years, especially since 2020.
Sam Wasson graduated from the University of Utah with a degree in Film and Media Arts with an Emphasis in Entertainment Arts and Engineering. Sam brings over four years of content writing and media production experience to the Today’s Homeowner content team. He specializes in the pest control, landscaping, and moving categories. Sam aims to answer homeowners’ difficult questions by providing well-researched, accurate, transparent, and entertaining content to Today’s Homeowner readers.
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Investors piled into the housing market in 2021 due to rock-bottom mortgage rates and surging housing demand, and are now retreating amid projections that home prices have room to fall.
These properties were seen as high-return, low-risk investments since investors could buy them up at low cost, make minor repairs, and resell them once the market stabilized or turn them into rental properties. Since then, single-family homes have been a consistent investment opportunity in many companies' portfolios.
According to data reported by the PEW Trust and originally gathered by CoreLogic, as of 2022, investment companies own about one fourth of all single-family homes. Last year, investor purchases accounted for 22% of American homes sold. This is significantly down from the 80% number in 2020-2021, why is this?
Selling to an investor means a quicker — and smoother — sale. Big plus: Not waiting around for months for potential buyers to make a decision. Selling a home quickly helps you avoid extra mortgage payments, prevent vandalism in vacant homes, and pocket money you can use when and where you need it.
If the company has borrowed money to purchase the house, it can build equity over time, essentially increasing the percentage of the home it owns outright and can then borrow against later on.
John Malone is the largest private landowner in the United States. Malone made his fortune as a media tycoon, building the company Tele-Communications, Inc, or TCI, and acting as its CEO before selling it to AT&T for $50 billion in 1999.
Invitation Homes, for example, has approximately 80,000 homes for lease across the country and is the largest landlord for single-family homes in the United States (here) (here).
The country with the highest free-and-clear homeownership rate in the list above was Lithuania at 83%. In the U.S., the free-and-clear homeownership rate was 23%. If free-and-clear homeownership is the American Dream, then apparently Lithuania and many other countries are living the American Dream.
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In fact, the average person will own at least three houses in their lifetime. Living in one place for most of your life may or may not be your goal, but if it is, there are things you must do as a homeowner to ensure your home lasts as long as you'd like it to.
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Bottom Line: BlackRock is an active investor in the U.S. real estate market, but we are not among the institutional investors buying single-family homes.
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Introduction: My name is Rev. Leonie Wyman, I am a colorful, tasty, splendid, fair, witty, gorgeous, splendid person who loves writing and wants to share my knowledge and understanding with you.
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