1 in 5 Homes Bought by Investors

In 2020 1 in 5 homes were bought by investors. find out what that means for an already squeezed housing market

One in five homes that were bought in 2020 were purchased by investors. 

This might sound like a startling number, and to me it is. I was shocked when I first heard it. But, this isn’t something that has recently developed post-pandemic. In fact, data from financial services company Core Logic shows that this is part of a fairly steady trend going back decades. 

Jeff Lazerson points this out in his recent column in the Orange County Register. In it he says 

“First-time homebuyers and other low-down-payment buyers (less than 20% down for example) cannot compete. The big boys come in with cash. They have the financial resources to win every bidding war. No contingencies. No fuss. No muss. Close fast as you can.”

This situation represents a double-edged sword because the majority of these investors are not hedge-fund billionaires or corrupt foreign officials. Data shows that most of these investors actually own less than one hundred homes. Granted, one hundred does sound like a lot, but this also includes anything less than that. This means people who have bought a starter home, scrimped and saved, and have been able to buy a rental. Traditionally, real estate has been a great way for average Americans to begin to build wealth. 

But, there is obviously a flip side to this equation. This same data also shows that largest share of investor dollars, and the place that has seen the biggest increase, is in lower priced homes. Obviously this increases competition for what would otherwise be starter homes, and potentially locks people out of that ability to begin to build wealth.  

There are many on the right who would reply that the answer should be market driven. Any time a bubble begins to form, they say, supply will increase to the point where in outstrips demand, and the market will reach equilibrium. The problem is, an inflated housing market that responds by overdeveloping density, especially density built in a hurry with no mind toward beauty or the history of a community, has long term impacts on those communities, and on the value of the homes of the people who live there.

This obviously creates a complicated situation for anyone looking at the real estate market, so to help break it down I spoke with the author of the column that inspired this segment, Jeff Lazerson. Watch that interview here.