If you're thinking about buying a home, you may find yourself interested in the latest real estate headlines, so you can have a pulse on all the things that could impact your decision. If that's the case, you've probably heard mention of investors and wondered how they're impacting the housing market right now. That could leave you asking yourself questions like:
- How many homes do investors own?
- Are institutional investors, like large Bay Street firms, really buying up so many homes that the average person can't find one?
To answer those questions, here's the real story of what's happening based on the data.
Let's start by establishing how many single-family homes (SFHs) there are and what portion of those are rentals owned by investors. According to SFR Investor (which studies the single-family rental market), 82.93% of homes are owner-occupied - meaning the person who owns the home lives in it. If you subtract that from the total number of single-family homes at 100%, that leaves just about 17% left that are single-family rentals (SFRs).
Do institutional investors own all of those 17% of SFR homes? Not even close. Let's take it one step further. There are four categories of investors:
- The mom & pop investor who owns between 1-9 SFRs
- The regional investor who owns between 10-99 SFRs
- Smaller national investor who owns between 100-999 SFRs
- The institutional investor who owns over 1,000 SFRs
As you can see in the chart, despite what the news and social media would have you believe, the green shows the vast majority are not owned by large institutional investors. Instead, most are owned by small mom-and-pop investors, like your friends and neighbors.
What's happening is, that there are people out there, just like you, who believe in homeownership, and they view buying a home (or a second home) as an investment. Maybe they saw an opportunity to buy a second home over the last few years to use it as a rental and generate additional income. Or maybe they just decided to keep their first house rather than sell it when they moved.
So, don't believe everything you read or hear about institutional investors. They aren't buying up all the homes and making it impossible for the average person to buy. That's just not what the numbers show. Institutional investors are actually the smallest piece of the pie chart.
What Does This Mean For You?
While it's true that institutional investors are a player in the single-family rental marketplace, they're not buying up all the houses on the market. If you have other questions about things you're hearing about the housing market, connect with me today, so you have an expert to give you the context you need.
source: KCM, SFR Investor
Disclaimer: The above information is from sources believed reliable but should not be relied upon without verification. The publisher assumes no responsibility for its accuracy. You are encouraged to get independent legal advice before commencing any transaction.
