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Apartment-dwelling millennials rejoice.
At long last, institutional home real estate investors — the type of companies that have been upending house auctions and outbidding traditional home seekers in desirable neighborhoods near you — appear to be slowing their frenetic pandemic-era shopping sprees, according to new data published by brokerage firm Redfin on Tuesday.
Live, Laugh, Love (Low-Interest Rates)
Institutional investors, including major firms like JPMorgan and Blackstone, have poured into the home-buying market since the beginning of the pandemic — particularly in newly desired suburban markets — snapping up nearly 1 in 5 homes across the country in the first quarter of this year. In the process, they’ve become something of a scourge on local communities, driving up prices across the board.
After a few years of aggressive activity, the biggest players may have gotten out in front of their skis. Tricon Residential, Invitation Homes, and American Homes 4 Rent, three of the largest publicly traded owners, have underperformed the S&P 500 so far this year. Meanwhile, Redfin, Zillow, and Opendoor have each shuttered their algorithm-driven online home-flipping divisions this year.
Now, institutional investors are losing their greatest advantage: low-interest rates. Without access to cheap capital and with the overall housing market cooling, institutional investors are starting to feel less at home:
- Investors purchased 60,000 homes across 40 markets tracked by Redfin during the third quarter, the brokerage firm reports. That’s down from a staggering 94,000 in the same quarter a year ago and, early pandemic aside, marks the largest investor purchase percentage decline since the subprime mortgage crisis.
- The 30% decrease in investor purchases year-over-year slightly outpaces the drop in traditional homeowner sales during the third quarter, which fell 27%. Home prices were up 13% in August, the most recently available time period tracked by the S&P CoreLogic Case-Shiller national home price index.
Bring Down the House: Still, investors accounted for 17.5% of all home sales countrywide in the third quarter. That’s down from the nearly 20% high in recent years but remains higher than the 15% peak seen at any time pre-pandemic. For now, the odds are still pretty good you’ll be buying a housewarming gift for your new neighbor, Jamie Dimon.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.