Eagle-eyed home investors gambling on the continuation of the U.S. housing shortage set a record in Q3, as Redfin reports that investors accounted for a record 18.2% of the U.S. homes purchased, up from a revised rate of 16.1% in Q2 of 2021, and 11.2% year-over-year.
In total, investors purchased 90,215 homes in Q3, amounting to $63.6 billion worth of homes, marking a new record for this metric, up 10.1% from Q2, and up 80.2% year-over-year. The median-priced home purchased cost $438,770—5.3% higher than Q3 2020.
Redfin reported that 76.8% of investor home purchases in Q3 were paid for in all-cash transactions.
"Increasing home prices fueled by an intense housing shortage have created opportunities for investors to reap big profits," said Redfin Senior Economist Sheharyar Bokhari. "Those same factors have pushed more Americans to rent, which also creates opportunities for investors because investors typically turn the homes they purchase into rentals and can now charge higher rents."
Those shut out of the purchase market had to turn to rentals for their housing needs, as the average monthly rent cost rose 10.7% year-over-year in September 2021, the fastest growth in at least two years, while the median home sale price increased 13.9%.
"With cash-rich investors taking the housing market by storm, many individual homebuyers have found it tough to compete," Bokhari said. "The good news for those buyers is that the housing market has started to cool. Bidding wars are on the decline, and if home-price growth continues to ease, we may see investors slow their roll."
By home type, single-family homes accounted for 74.4% of all investor purchases in Q3—the highest level recorded by Redfin—up from 70.6% a year earlier. Condos and co-ops took a 16.9% share of all investor purchases, a record low, and a decrease from 19.8% in Q2 of 2020. Townhouses and multifamily housing represented 5.4% and 3.4% of investor purchases, respectively—little changed from a year earlier.
Redfin recently reported that an increasing number of inquiries have come in from potential buyers curious about the climate and an area’s flood and fire risk, and how those tangibles factor into insurance costs.
In Q3, 65.2% of the homes purchased by investors had high heat risk, while 64.3% had a high storm risk. Meanwhile, 27.1% faced high drought risk, 22.2% had high flood risk, and 3% had high fire risk. Redfin noted that these percentages don’t add up to 100% because it's possible for homes to face more than one climate risk.
Feeding off the climate-related data, investors targeted the Atlanta area in Q3, as 32% of the homes that sold in Q3 were purchased by this buyer—the highest share of the 40 U.S. metropolitan areas Redfin analyzed—followed by Phoenix with 31.7%; Charlotte, North Carolina at 31.5%; Jacksonville, Florida at 28.3%; and Miami at 28.1%.
To the other extreme, areas of cooler weather such as Providence, Rhode Island reported that investors purchased just 5.4% of homes sold—a lower share than any other metro in this analysis—followed by Montgomery County, Pennsylvania (7.1%); Virginia Beach, Virginia (7.1%); Washington, D.C. (7.2%); and Warren, Michigan (7.4%).
Click here to read more about Redfin’s analysis of Q3 investor purchases.