1 in 5 Homes are being bought buy Wall Street traded firms

[Robin Carriger]

Wall Street's leverage in housing market is 'very concerning': Finley | Fox News Video

Will the current trend of hedge funds and publicly traded investment firms buying 1 in 5 homes continue?  Will that percentage increase, decrease or stay about the same over the next year?  2 years?

[Mike Hern]

Quote from @Robin Carriger:

Wall Street's leverage in housing market is 'very concerning': Finley | Fox News Video

Will the current trend of hedge funds and publicly traded investment firms buying 1 in 5 homes continue?  Will that percentage increase, decrease or stay about the same over the next year?  2 years?

 Yes. It will continue for 6 months to a year. They have to protect their cash from inflation. They can't just put $40 billion or more into the bank or into bonds since the return is so low there. But, there is a second side to the question . . .

The other question is "Will hedge funds and publicly traded investment firms regret buying homes" I think so. There is so much pain to running a landlord business that they aren't generally prepared for the long term. Plus, they are accustomed to liquidity in stocks, bonds, mbs, cdo's, derivatives and other like-kind assets. Real estate is not liquid. There are a lot of down sides to owning real estate that don't fit their way of doing business.  When the hedge funds start dumping real estate, it wil be a blood bath once again.

It is Just another cycle in the real estate investment business.

[Chris Seveney]

Quote from @Robin Carriger:

Wall Street's leverage in housing market is 'very concerning': Finley | Fox News Video

Will the current trend of hedge funds and publicly traded investment firms buying 1 in 5 homes continue?  Will that percentage increase, decrease or stay about the same over the next year?  2 years?

 This is anyones guess. It depends on what the alternatives are. As mentioned real estate is a secured asset class so in volatility its a place to put money but the challenge is its not liquid. Depending also what happens overseas, you may see more foreign buyers getting back into the mix like from China who was buying up real estate like there was no tomorrow a decade ago. If there markets continue to crash they look for a safe place to put $. Its all relative - as does it matter whether its a $50B fund or an investor with 100 doors buying the rental? 

[Nicholas L.]

@Robin Carriger

in my opinion, the purchase of smaller rentals by "Wall Street" has been continuously overstated.  it varies widely by market and state, as there are markets and also entire states in which institutional buyers own basically no properties.

see this article:

https://www.vox.com/22524829/w...

in Georgia for example, they own just over 5% of SFRs and less than 1% of all housing...

thoughts?

[Bob Willis]

This has been going on for years. See this story from four years ago - https://www.azcentral.com/stor... Former VP Dan Quayle was part of a group snatching up homes in Phoenix.

[Chris Levarek]

@Robin Carriger And who do you think invests into said hedge funds? It will continue as long as it makes sense to do so to curb inflation, make a profit, satisfy investor demand, etc. When 30% rental growth numbers are being flashed in Florida, Texas and Arizona, can you blame them?

It is a funny argument to me when I hear the public criticizing businesses acting like businesses when inevitably they are doing so because of customer demand. Funny because the customer is often the public through investments, 401ks, etc! Not saying that is what the post is about, just adding to the discussion.

Interesting times!

[Robin Carriger]

@Nicholas L.  Good point... I guess it's a little bit more of an issue for us in Texas, because 28% of single-family houses are being bought by iBuyers here.

[Robin Carriger]

@Nicholas L. Now that I've done a little more searching, it's actually worse than I thought. In Tarrant County, TX (Fort Worth, etc.) where I live, which has been the primary target area for our investing efforts over the years, the National Association of Realtors' (NAR) research says 52% of homes were bought by institutional investors in 2021.  In Dallas County, it's 43%.

[Nicholas L.]

@Robin Carriger understood.  But, I looked into the reporting too, and it says that "45% were sold back or flipped," as opposed to being held.  And, I think "institutional buyer" here includes small investors set up as LLCs, not just the big operators.  So... I agree with you that it's not helpful, but it's still not clear to me what the actual impact on pricing is.  It's a good topic to discuss.

[Bruce Lynn]

Blackstone currently raising something like $25Billion fund to buy real estate.  Not their first rodeo.  Not all that will go into single family homes.  Some will go to apartments, some to hotels, some to warehouses....maybe office building here or there, but I doubt that is their primary focus.   Many family offices and other hedge type funds and maybe even small investors will continue to look at real estate during inflationary times and also a time of extreme housing shortage.   No one seems excited about stock market right now.  No one seems excited for years now about bonds.  Precious metals not moving.  BTC is in the tank and seems like a scam to many.   So real estate is one of the only positive investments left.

[Bill Brandt]

Either you missed a zero or they are misleading you…

1 in 5, 20% are owned by “investors” but 90% of those investors own 3 or less homes. Mom and pops

“Wall Street” big institutions own about 2% or 1 in 50 homes. 

We could discard the constitution, take away the rule of law and force them all to sell, throwing all the poor renters out on the street to help the middle class afford homes. But they might be better off just forcing everyone to sell their vacation homes. 

[Jordan Moorhead]

I don't believe that statistic across all markets. Maybe in certain markets but it's certainly not 1 in 5 everywhere, or in Austin. We have listed more than 20 this year, no institutional investors and only one that could be made an offer.

[Bruce Lynn]

@Bill Brandt   The numbers we are seeing are something more like 50+% of the homes in Tarrant County (Fort Worth) in 2021 were bought by institutional investors.  As with any stats, there is always more to the story.  Certain areas, certain ages, certain price ranges, etc.   Typically around here the buy boxes are pretty tight.  They're not buying older homes, expensive homes, etc.   Probably not too many vacation homes in Tarrant County.  As you mention there are plenty bought by small investors and some by flippers.  I never see them say how they split those out or if they even do isolate those.   At any rate probably the newer homes and in lets say $250,000-$450,000 have a very very strong institutional presence in Tarrant County.

[Bill Brandt]

This article uses the same 52% number and it’s misleading or wrong as it says “institutional investors” when it means any investors. And since 90% on investor purchases are mom and pops. Institutional investors probably account for 4-10% give or take. 

The way you can tell is they say 28% of all of Texas is institutional investors compared to 13% average for the country  since we know the real average for the country is 2%  we know they’re wrong, by accident or on purpose  

https://www.wfaa.com/article/n...

They are simply stating how many were bought by investors and then mislabeling the buyers. 

[Nicholas L.]

@Bill Brandt totally agree!  It's the same way that a flip is defined as a house that sells more than once in 12 months.  So if you buy a primary residence and then unexpectedly have to move, say for work, and sell - you've "flipped" that house.

[Bill Brandt]

@Nicholas L.

I have an even worse flipping statistic in the news for you.

They will report flipping markets where flippers are making $100k per flip. They’ll take the sales price minus the previous sales price and show the $100k difference. Like there was no realtor’s commission and the flipper spent $0 on upgrades or repairs and holding costs. 

You can easily flip for $100k more and lose money. 

[Robin Carriger]

I've been an active Real Estate Investor for 19 years now, so I remember the days before iBuyers like Opendoor entered the market.  This reply isn't an argument, because I appreciate the other perspectives that have been shared here.  This is, however, a firsthand, personal observation.

Over the last several years, on EVERY potential deal that's come to us via our direct marketing efforts, we've competed directly with at least one iBuyer.  And... from conversations with those motivated sellers, the iBuyer's offer has been slightly below, at or slightly above retail.  So... although my personal experience doesn't come with comprehensive statistical data, it's led me, and virtually every other investor I know in DFW, to believe that iBuyers are playing much more than a 2% buying role... at least in our corner of the world.  With that said, there are, of course, other ways to find profitable deals, and we've done well with those.

Thanks to everyone for your thoughtful replies.  If you have more articles, videos, etc., please continue to share them here.  :-)

[Alex Forest]

Quote from @Bill Brandt:

Either you missed a zero or they are misleading you…

1 in 5, 20% are owned by “investors” but 90% of those investors own 3 or less homes. Mom and pops

“Wall Street” big institutions own about 2% or 1 in 50 homes. 

We could discard the constitution, take away the rule of law and force them all to sell, throwing all the poor renters out on the street to help the middle class afford homes. But they might be better off just forcing everyone to sell their vacation homes. 

I agree. The one in five has to be for all investors. I've seen some of the reports recently in how they characterize this, and there are certain criteria such as the buyer has a different primary address or the buyer is listed as an LLC or other entity, etc. Essentially it is a non primary buyer, which is also a term that has been used to describe these type of purchases. It almost sounds as if some of the news outlets picked up on this and started calling these buyers 'Wall Street' or instructional investors, conflating the analysis, whereas the majority are mom and pop small investors.

[Alex Forest]

@Robin Carriger From what I've seen (read), which is certainly incomplete, the ibuyers concentrate on specific cities or metro regions. They can be quite concentrated in a certain metro, but overall they seem to focus on a small minority of total metro areas (I could be wrong but think I recall seeing such a map)...., if you are seeing a lot of that activity, you may be playing in one of the same few sandboxes?

[Chad McMahan]

Quote from @Robin Carriger:

Wall Street's leverage in housing market is 'very concerning': Finley | Fox News Video

Will the current trend of hedge funds and publicly traded investment firms buying 1 in 5 homes continue?  Will that percentage increase, decrease or stay about the same over the next year?  2 years?

Robin,
not sure where you got your 1 out of 5 data. It's just over 2% of homes are owned by these firms- so their influence is minimal. It's also completely ludicrous that 1st time home buyers cannot purchase right now- because they are getting out-bid. Now is 1 of the best and most leveraged times to buy, that we have seen since 2008/2009. We have transitioned from a strong seller's market to a buyer's market. I do expect prices to continue to drop before stabilizing- but buyers now hold the keys to the castle.

This video is 90% absurd and 10% value. Fearmongering can be quite dangerous for the sheep masses.

The only part of the video I agree with, is the end- where they say government is politically back pedaling from recession verbiage. It is our responsibility as investors and simply as human beings- to see through these agendas and make the best choices we can for ourselves and our families and try not to get too caught up in the noise.