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Small Investors Pick Up Greater Market Share

Katie Jensen
Aug 30, 2021

Lately, small investors have been picking up a significant share of the investment market at the expense of their much larger counterparts.

KEY TAKEAWAYS
  • Small investors have been picking up a significant share of the investor market, at the expense of their much larger counterparts.
  • More people are migrating from expensive areas into more affordable ones, allowing small investors to snatch up properties at lower rates.
  • More investment activity is growing in Boise, Idaho; Phoenix, and Salt Lake City, due to their growing populations and the large out-migration from California.
  • Molly Boesel, principal economist at CoreLogic, believes investor activity will increase as more investors try to buy properties at lower prices.

The Investor Homebuyer report by CoreLogic was recently released, highlighting U.S. home purchase trends between 2011 and 2020. Home purchase trends are analyzed by price tier, investor size, as well as which regions had the most and the least purchase activity.

In 2006, there was a frenzy of home purchases following the housing market crash, mainly because investors wanted to capitalize on low-cost, high-growth properties. Although home purchase activity eventually peaked in 2018, the pace of investments have been declining ever since. In 2019, the investment rate (share of home purchases made by investors) in the U.S. housing market was 16.3%, and in 2020, it had slowed to 15.5%. 

Although the investment rate has continually decreased in the past 10 years, the investor market has kept a strong presence. Lately, small investors have been picking up a significant share of the investor market, at the expense of their much larger counterparts. This can be attributed to the fact more people are migrating from expensive areas into more affordable ones, allowing small investors to snatch up properties at lower rates. 

As the first year of a new decade — moving farther away from the pandemic, while the housing market cools down — Molly Boesel, principal economist at CoreLogic, believes investor activity will increase as more investors try to buy properties at lower prices. “Although investors seem to have given some of their coveted market share to buyers, it’s hard to say how long this trend will last — or what the long-term implications will be on a larger scale,” Boesel said. 

Trends have changed significantly over the past 10 years. In 2011, California dominated in investor activity, with Los Angeles, San Jose, San Diego, San Francisco, Sacramento, Stockton and Riverside all named the top 10 areas with the highest investor activity. However, no California metros made it within the top 10 in 2020. 

The Mountain West, the western Midwest, and the South led investment activity in 2020, with more investment activity growing in Boise, Idaho; Phoenix and Salt Lake City, due to their growing populations and the large out-migration from California. 

The Northeast performed the worst in terms of investment activity within the past decade, with their metros representing eight out of the ten with the least investment activity. Hartford, Connecticut, had the lowest investment share at 8%. 

To read the full Investor Homebuyer report by CoreLogic, click the link provided.

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