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Investors Dump Cash Into Real Estate

Katie Jensen
Feb 09, 2022
cash purchase

'Even though investor profit margins may be declining... we’ll continue to see the investor share of purchases increase over the next few quarters.'

KEY TAKEAWAYS
  • Investors are dumping their cash into real estate and buying up properties in the southern states.
  • In the third quarter of 2021, real estate investor purchases accounted for 16.4% of all home purchases nationally compared to 11.7% in the same quarter last year, marking a 40% year-over-year increase.
  • Investors across the country also got a significant discount on their purchases, paying 18.9% less on average than the overall median sale price in the third quarter of 2021.
  • Investors have been paying with all-cash in a majority of cases. In the third quarter, 79% of all investor purchases were cash sales.

Investors are dumping their cash into real estate and buying up properties in the southern states that still draw a crowd from pandemic homebuyers. In the third quarter of 2021, real estate investor purchases accounted for 16.4% of all home purchases nationally compared to 11.7% in the same quarter last year, marking a 40% year-over-year increase, according to the RealtyTrac Investor Purchase Report. 

The nationwide increase in real estate investor purchases nearly affected the entire country, except for five states that had a year-over-year decrease in the third quarter. Alaska, Delaware, Iowa, Nebraska and Vermont were the only states to show a decrease in real estate investor purchases during that period.

“The share of investor purchases continues to rise in the vast majority of states,” said RealtyTrac executive vice president Rick Sharga. “Despite historically low inventory of homes for sale, and historically high prices, both fix-and-flip and rental property investors continue to be very active in the residential market.”

Investors across the country also got a significant discount on their purchases, paying 18.9% less on average than the overall median sale price in the third quarter of 2021. The median purchase price was $245,000 for investors compared to $302,000 for all home purchases. Still, this is significantly lower than the discount investors got when they purchased homes in the second quarter of 2021, paying 29.4% less on average. 

States that had the highest price discounts for investor properties:

  • Arkansas: 76.7% discount
  • West Virginia: 60.0% discount
  • Michigan: 59.5% discount
  • Louisiana: 51.5% discount
  • Delaware: 47.9% discount

Investors have been paying with all-cash in a majority of cases. In the third quarter, 79% of all investor purchases were cash sales compared to 69.5% during the same quarter in 2020. Cash purchases accounted for more than 50% of all investor purchases in every state, other than Alaska, Wyoming, and the District of Columbia.

“As mortgage rates rise, investors benefit even more by being able to execute all-cash purchases,” Sharga noted. “Rising home prices and inflation make it difficult for investors to achieve their ROI objectives, but they make it even harder for the average consumer to afford to buy a property. So even though investor profit margins may be declining, it’s possible that we’ll continue to see the investor share of purchases increase over the next few quarters.”

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