Profit margins have dropped a bit overall and by larger amounts in some markets. Lakeland-Winter Haven and Jacksonville are near the top for U.S. investor sales.
NEW YORK – As housing prices tumble across the country, institutional investors that had snapped up properties during a pandemic-induced increase in rental rates are now unloading their properties.
Nationally, profit margins on median-priced single-family homes and condo sales across the U.S. decreased from 57.6% in the second quarter to 54.6% in the third quarter as home prices declined for the first time in nearly three years, according to ATTOM’s recently released 2022 U.S. Home Sales Report.
Meanwhile, Redfin reported earlier this year that the average monthly rent in the United States surpassed $2,000 for the first time in May, rising 15% year over year to a record high of $2,002.
ATTOM found that institutional investors nationwide accounted for 6.7% – 1 in every 15 single-family home purchases – in the third quarter. That’s up from 6.4% in all of 2022 but down from 8.4% in the third quarter of last year.
The states with the largest percentage of sales to institutional investors in the third quarter were:
- Arizona, 14.3%
- Georgia, 12.7%
- Tennessee, 10.7%
- Nevada, 10.6%
- North Carolina, 10.2%
States with the lowest percentage of sales to institutional investors in the third quarter were:
- Hawaii, 1.9%
- Rhode Island, 2.1%
- Maine, 2.1%
- New Hampshire, 2.3%
- Louisiana, 2.5%
While some institutional investors were buying homes in the third quarter, others were shedding properties. Metropolitan areas with a population of 200,000 or more and 50 or more home sales in the third quarter that saw the greatest share of institutional investors selling properties included:
- Metro Memphis, including Tennessee, Mississippi and Arkansas, 19.7%
- Jacksonville, Florida., 18.3%
- Macon, Georgia, 17.6%
- Atlanta-Sandy Springs-Roswell, Georgia, 16.8%
- Metro Clarksville, including Tennessee and Kentucky, 16.7%
- Charlotte-Concord-Gastonia in North Carolina and South Carolina, 16.4%
- Lakeland-Winter Haven, Florida, 15.8%
- Phoenix-Mesa-Scottsdale, Arizona, 15.4%
- Indianapolis-Carmel-Anderson, Indiana, 15.1%
Among the factors contributing to the national home affordability problem are institutional investors and private companies buying for-sale and for-rent units to rent or flip to sell for higher prices, making first-time homeownership more challenging and limiting the ability to build wealth.
Institutional investors are attracted to single-family rentals and build-to-rent communities as skyrocketing housing prices fuel strong demand for rental property. Institutional investors increased capital investments in the sector to $45 billion in 2021, according to John Burns Real Estate Consulting.
Rent growth expanded 14.7% for single-family rentals year-over-year in November 2021, according to Yardi Matrix. And the national average occupancy increased to 95% by the third quarter, according to Arbor Realty Trust.
Real estate crowdfunding platform ArborCrowd expects more institutional investment into single-family and build-to-rent properties because investors have a high demand for resilient assets and have more ways to enter the space, including acquiring existing portfolios, aggregating scattered sites and building ground-up, fully amenitized communities.
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