Demand would-be home residents slides. Overall, existing- and new-home sales fell in June.
We know that home sales are dropping. But the drop in demand for homes may be coming exclusively from people who would live in them, not from investors.
Existing-home sales fell in June to a two-year low, according to the National Association of Realtors. Sales slid 5.4% from May and were down 14.2% from June 2021. June marked the fifth straight month of decline.
Meanwhile new-home sales slid 8.1% in June from May, also to a two-year low and also marking a fifth consecutive monthly decline, according to the government.
But purchases by investors made up 9.5% of home sales in April, not far below February’s record of 9.7% and up 64% from 2019, according to Realtor.com.
Taking Back Their Share
“After declining in the early months of the pandemic, investors have gained back their share of home purchases over the past two years, outpacing growth among non-investors,” Realtor.com economist Sabrina Speianu wrote in a commentary accompanying the data.
“Investors continue to buy more homes than they sell, competing with homebuyers more than sellers.” A total of 72.2% of investors paid for their homes with cash.
As for the metropolitan areas where investors accounted for the highest percentage of buying in the 12 months through April:
1. Charlotte-Concord-Gastonia, N.C.-S.C.: 20%
2. Branson, Mo.: 19.5%
3. Birmingham-Hoover, Ala.: 18.9%
4. Summit Park, Utah: 18.6%
5. Memphis: 18.5%.
“While soaring mortgage rates have forced many Americans to put homebuying plans on pause this spring, 2022’s financial shifts have yet to take the steam out of investor activity,” said Realtor.com Chief Economist Danielle Hale.
Impact on Buyers and Sellers
And as for the impact on home buyers and home sellers, “in the shorter term, everyday home shoppers should be prepared to face tough competition from a group that has deep pockets, often filled with cash,” she said.
Sellers “may benefit from investors making strong offers, at a time when overall demand is cooling.”
Meanwhile, home-rental prices have soared in the past 18 months, just like home-purchase prices.
Rental information service Zumper’s National Rent Index hit a record in July. The median one-bedroom rent totaled $1,450 in the month, up 2% from June and 11.3% from a year earlier.
The two-bedroom median rent hit $1,750 in July, also up 2% from June and up 9.3% from July 2001.
“[Apartment] affordability will continue to be a substantial challenge” going forward, according to a study commissioned by the National Apartment Association and the National Multifamily Housing Council.
