Quick to enter the market, institutional investors are now abandoning single-family home rentals

As housing prices fall across the country, institutional investors who had purchased properties during a pandemic-induced increase in rental rates are now unloading their properties.

Nationally, profit margins on sales of median-priced single-family homes and condos in the United States fell from 57.6% in the second quarter to 54.6% in the third quarter, as house prices fell for the first time in nearly three years, according to the ATTOM published 2022 U.S. Home Sales Report.

Meanwhile, Redfin reported earlier this year that the average monthly rent in the US topped $2,000 for the first time in May, rising 15% year-on-year to a record high of $2,002.

ATTOM found that institutional investors nationwide accounted for 6.7% – 1 in 15 single-family home purchases in the third quarter. That’s up from 6.4% in 2022, but down from 8.4% in the third quarter of last year.

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The states with the largest percentage of sales to institutional investors in the third quarter were:

  • Arizona, 14.3%

  • Georgia, 12.7%

  • Tennessee, 10.7%

  • Nevada, 10.6%

  • North Carolina, 10.2%

The states with the lowest percentage of sales to institutional investors in the third quarter were:

  • Hawaii, 1.9%

  • Rhode Island, 2.1%

  • Maine, 2.1%

  • New Hampshire, 2.3%

  • Louisiana, 2.5%

While some institutional investors bought homes in the third quarter, others got rid of their properties. Metro areas with a population of 200,000 or more and 50 or more home sales in the third quarter that saw the largest share of institutional investors selling properties included:

  • Metro Memphis, including Tennessee, Mississippi and Arkansas, 19.7%

  • Jacksonville, Fla., 18.3%

  • Macon, Georgia, 17.6%

  • Atlanta-Sandy Springs-Roswell, Georgia, 16.8%

  • Metro Clarksville, including Tennessee and Kentucky, 16.7%

  • Charlotte-Concord-Gastonia in North Carolina and South Carolina, 16.4%

  • Lakeland-Winter Haven, Florida, 15.8%

  • Phoenix-Mesa-Scottsdale, Arizona, 15.4%

  • Indianapolis-Carmel-Anderson, Indiana, 15.1%

Among the factors contributing to the national housing affordability problem are institutional investors and private companies who buy units for sale and rent to rent or resell them at higher prices, making home ownership ownership more difficult and limits the ability to create wealth.

Institutional investors are drawn to single-family rentals and build-to-let communities as soaring housing prices fuel strong demand for rental properties. Institutional investors have increased capital investment in the sector to $45 billion in 2021, according to John Burns Real Estate Consulting.

Rent growth rose 14.7% for single-family rentals year-over-year in November 2021, according to Yardi Matrix. And the national average occupancy rate rose to 95% in the third quarter, according to Arbor Realty Trust.

Real estate crowdfunding platform ArborCrowd expects more institutional investment in single-family and build-to-let properties as investors have strong demand for resilient assets and more ways to enter the market. space, including the acquisition of existing portfolios, the aggregation of dispersed sites and the construction of land. fully serviced communities.

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