Big Cash Bidders Retreat, Small Investors Rise: Real Estate Trends Shift
Title: Small Investors on the Rise as Big Cash Bidders Retreat: Real Estate Market Shifts
In a significant shift in the real estate market, individual investors are gaining ground as large institutional buyers pull back from all-cash home purchases. This trend is seen as leveling the playing field for everyday homebuyers, according to experts.
A report from Realtor.com revealed that the number of institutional investors buying with cash has dropped to 64% in the first quarter, down from a peak of 69.7% in late 2021 and the lowest level since 2008. At the same time, individual investors, those who have purchased 10 or fewer homes since 2001, now account for 62.6% of investor purchases, the highest share on record.
Real estate executive G. Brian Davis commented on the shift, stating, “It’s better for everyone involved that institutional money is withdrawing from the single-family home space. It creates less artificial demand among buyers, therefore reducing some upward pressure on prices. It also leaves room for mom-and-pop investors to operate.”
Despite the decrease in institutional cash buyers, overall investor activity remains elevated compared to pre-pandemic levels. Investors accounted for 14.8% of home purchases in the first quarter, the highest share on record, even as total home sales fell to their lowest level in more than a decade.
The rise of individual investors may reflect changing attitudes toward real estate investment and financing. Brie Schmidt, owner of Second City Real Estate in Chicago, noted that more transactions now involve ‘mom-and-pop’ investors who are more likely to use financing to maximize their capital and acquire multiple cash-flowing properties.
While cash offers are losing some appeal, they remain popular in certain markets such as Portland-South Portland, ME, Albuquerque, NM, and Toledo, OH, where all-cash investor purchases exceed 80%.
The shift away from all-cash purchases is not limited to investors, as the share of non-investor buyers using all-cash offers has been increasing since early 2021, reaching over 33% in the first quarter. This trend is likely driven by high levels of home equity and elevated interest rates, making cash purchases more attractive for those who can afford them.
Real estate professionals see advantages in the current environment, with financing providing buyers more time for due diligence. Robert Dodson, a sales manager and broker, highlighted that financing creates a longer timeline for closing, allowing buyers more opportunities for inspections and property review.
Overall, the real estate market is experiencing a shift towards more individual investors and financing, which could benefit both buyers and sellers in the long run.
Source: Benzinga.com
