Skift Take
The real estate market might be tight, but investors' purse strings are still loose
Key Points
- Investor home purchases have significantly increased, especially in Sun Belt states.
- Short-term rental demand has grown faster than hotel demand in early 2023.
- Legislation is being proposed to limit corporate ownership of single-family homes in states like Ohio and North Carolina.
Summary
Investor activity in the U.S. housing market has notably increased, particularly in Sun Belt states, despite high interest rates. As of August 2023, investors purchased a significant share of single-family homes, with California and Washington DC seeing some of the highest percentages. There is strong demand for rentals, with short-term rental demand outpacing hotel growth. Legislative efforts are underway to counteract the adverse effects of large private investment companies on local housing markets, with measures proposed in Ohio and North Carolina to limit corporate ownership of single-family homes.
That investors are buying single-family homes across the country is not new, but how much and where?
Investor activity is particularly notable in Sun Belt markets with strong population and rental growth. In early 2022, 28% of home sales were to investors buying single-family homes. This increase in investor activity persisted even as owner-occupant purchases declined, research from Harvard University’s Joint Center for Housing Studies found.
Skift reached out to CoreLogic, which provides real estate data, to learn the leading states where investors were buying up single-family homes.
“The data shows that investors are sticking around late even though interest rates are high,” said Thomas Malone, chief economist at CoreLogic. “To me it indicates that there is this strong demand for rentals in the market, because by and large, these people are buying these homes to rent them out.”
Top 20 States By Share of Home Purchases by Investors – August 2023
| State | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| California | 18.66% | 17.15% | 28.64% | 31.44% | 34.03% |
| Washington DC | 20.45% | 16.73% | 24.92% | 29.00% | 33.23% |
| Georgia | 22.40% | 20.58% | 33.00% | 34.90% | 33.12% |
| New Mexico | 21.56% | 20.21% | 26.73% | 29.13% | 31.46% |
| Kansas | 20.01% | 19.94% | 25.97% | 28.64% | 30.51% |
| Texas | 22.08% | 20.28% | 29.29% | 31.20% | 29.93% |
| Utah | 19.76% | 20.35% | 27.86% | 29.48% | 29.64% |
| Nevada | 20.46% | 17.77% | 29.92% | 33.10% | 29.49% |
| Tennessee | 18.76% | 18.69% | 26.17% | 28.54% | 29.01% |
| Mississippi | 23.61% | 24.13% | 25.61% | 28.13% | 28.75% |
| Arizona | 20.78% | 19.61% | 31.09% | 33.07% | 28.74% |
| Indiana | 19.79% | 19.35% | 26.13% | 28.16% | 28.19% |
| Missouri | 20.26% | 20.10% | 25.47% | 27.60% | 28.05% |
| Nebraska | 14.00% | 14.36% | 21.97% | 24.02% | 27.48% |
| Arkansas | 17.75% | 18.35% | 23.91% | 26.16% | 27.37% |
| Oklahoma | 18.90% | 18.21% | 24.59% | 26.68% | 27.10% |
| Idaho | 21.30% | 22.00% | 27.39% | 27.82% | 27.01% |
| Alabama | 17.57% | 17.10% | 23.01% | 24.85% | 26.04% |
| Washington | 12.60% | 12.76% | 22.34% | 23.71% | 25.73% |
| Kentucky | 15.68% | 15.99% | 20.87% | 23.22% | 25.54% |
Malone’s theory was confirmed by data released by AirDNA and the CoStar group, which found that guest demand for short-term rentals is growing faster than for hotels. The report found a significant surge in short-term rental demand growth across various location types, with a particularly notable increase in small city and rural areas. From January to May 2023, short-term rentals experienced a 24% growth in demand, while hotels’ growth remained stagnant at 0%.
The issue of investor homeownership is a contentious one at a time when cities across the country are tasked with tackling housing for their residents. Federal lawmakers have started to respond to this with legislation — U.S. Sen. Sherrod Brown, a Democrat from Ohio, introduced the Stop Predatory Investing Act in July, and it was co-sponsored by several Democratic colleagues. The legislation aims to address the adverse effects of large private investment companies on communities, such as buying properties, raising rents, and inadequate maintenance. This initiative is in response to institutional investors purchasing 21% of Ohio’s homes in 2021, double the previous year, aggravating the state’s housing shortage of 250,000 homes.
Similarly, Democratic lawmakers in North Carolina cities, including Charlotte and Raleigh, are proposing legislation to restrict corporate landlords from owning excessive amounts of rental properties. Representative Kelly Alexander, a Democrat, introduced the Home Ownership Market Manipulation Act, aiming to limit the number of single-family homes an individual or business can purchase in the state’s most populous counties to 100.
Although this measure, co-sponsored by Democrats from several counties, faces challenges passing in the Republican-controlled legislature, it marks the first effort to address the expansion of Wall Street-backed firms that have converted thousands of homes into rentals nationwide.
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Tags: future of lodging, investors, short-term rentals, vacation rentals
Photo credit: Avantstay lists many upscale vacation homes for rental, including this property in Isle of Palms by Charleston, South Carolina. Source: AvantStay.