- Institutional investors flush with cash drove up SFR demand by 6.6% YoY, seizing affordable properties alongside mid- and high-end homes.
- Long-term holders realized substantial profits in Q1, as the average home sold for over 55% above purchase price.
- All signs seem to indicate that the post-pandemic housing market is slowly stabilizing—even as aspiring homeowners are left in the dust.
Investors are showing renewed interest in the U.S. single-family rental market, targeting properties across price points, as reported by Globest.
Eyes On The Prize
Investors surged back into the single-family rental housing (SFR) market, with Q1 purchases totaling $31.3B, a 6.6% YoY increase. It was the first time SFR investments went up on an annual basis since 2Q22.
Investors snapped up nearly 20% of all homes sold, accounting for 47.5% of all low-priced home transactions.
But plenty of investors were interested in mid-range and high-end homes, particularly in California. They snapped up 10.5% more high-priced homes than they did in 1Q23, or around 28.5% of their total investments, and 4.7% more mid-range homes, or around 24% of all spending.
And long-term home holders reaped rewards, with homes selling for over 55% more than their average purchase price, a significant improvement from last year. The shift in investor focus to single-family homes and high-priced markets like California has also contributed to rising SFR prices.
Coming Out On Top
After years of rollercoaster volatility, investor activity in the housing market is stabilizing, perhaps a return to steady growth. Cash-driven purchases also comprised nearly 70% of all transactions, indicating investor demand for SFRs is almost immune to interest rate fluctuations.
This isn’t the case with individual buyers, who fell off the market as mortgage rates went up, reshaping current market dynamics. Of course, individual sellers are also enjoying higher profit margins right now—but re-entering the housing market may not be so easy.
Why It Matters
The housing market is slowly but surely stabilizing as investor activity becomes more consistent and strategic. An increased focus on single-family homes across price points and a willingness to forgo leverage for all-cash transactions point to recovering demand and long-term resilience in the SFR sector.
Aspiring homeowners, however, are experiencing a very different market. And as long as mortgage rates remain prohibitively high, institutional investors will keep eating their lunch.
