Real Estate

Mom-and-pop landlords stepping in as ‘mega-investors’ retreat from single-family market

While iBuyer purchases and investor activity dipped, investor-driven single-family home purchases were steady in Q4

Single-family home purchase demand by investors remained steady in the fourth quarter of 2022, despite a dip in iBuying and larger investor demand, according to a report released this month by CoreLogic.

The share of investor purchases of single-family homes fell to 21% in June of 2022, but rebounded to 26% in September and has remained stable since that point, according to CoreLogic economist Thomas Malone.

“[T]he investor share plateaued in the fourth quarter of last year at around 2 percentage points lower than its high of 28% in February 2022; however, this is still much higher than at any time pre-pandemic,” he said in the report.

Broadly speaking, the market cooled for both investment buyers and owner-occupied buyers. Investment buyers purchased on average 81,000 homes, a 25% decline in activity when compared with the purchase activity observed in Q4 2021. However, this is in general alignment with investor purchase activity during Q4 of both 2019 and 2020, respectively.

“Owner-occupied purchases, on the other hand, are well below the levels seen during those years,” Malone said. “Overall, it appears that housing demand declined for both investors and owner-occupied buyers fairly evenly, with both likely deterred by high prices and elevated interest rates.”

So-called “mega-investors” appear to be retreating from the market quickly, but smaller players in the investment space (defined as those who own fewer than 10 properties) are making up an increasingly larger share of the investment activity in the homebuying space.

“Mega-investors’ share fell from 11% of investor purchases in September to 9% in December,” Malone pointed out. “In that same time frame, the small investor share rose from 45% to 48%. The medium investor share (those with 11 to 100 properties) remained steady, at around 35% of home purchases. Large investors (those with 101 to 1,000 properties) represented 8% of all investor purchases.”

Mega-players in the investment space are remaining active in the Atlanta Metropolitan Statistical Area (MSA), however, where it remained the only MSA with more than 10% of home purchases in Q4 2022.

“Aside from Memphis, no other MSA in the top 10 investment markets has a corresponding number of more than 5%, which makes Atlanta a major outlier,” Malone explained.

IBuying activity sharply dropped beginning in the summer of 2022, and remained depressed through the end of the year.

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