Investors purchasing single-family rental homes skyrocketed during the pandemic, with the peak of purchases taking place in 2021. In the fourth quarter of 2021, the share of homes purchased in the United States by investors hit a record high of 18.4 percent. But last year saw a notable come down from the highs of 2021. In most major metros around the country, there was a significant drop in the number of investor purchases of single-family homes. Nationwide, the number of homes purchased by investors dropped 45.8 percent, according to Redfin. In places like Las Vegas and Phoenix, investor purchases fell by more than 60 percent. Still, many cities, especially in the Sunbelt region, are experiencing a significant number of home purchases by investors. We look at the top five cities for single-family home purchases by investors in 2022 compared to 2021 to get a sense of which markets remain attractive.
|City||Q4 2021: Investor share of single-family home sale purchases||City||Q4 2022: Investor share of single-family home sale purchases|
|1. Atlanta, GA||32.7%||Miami, FL||30.6%|
|2. Charlotte, NC||32.1%||Jacksonville, FL||26.6%|
|3. Jacksonville, FL||29.8%||Atlanta, GA||24.6%|
|4. Las Vegas, NV||29.2%||Anaheim, CA||22.6%|
|5. Phoenix, AZ||28.4%||Charlotte, NC||22.4%|
|U.S. Total||19.4%||U.S. Total||17.8%|
Single-family rental homes have been a part of the housing stock for a long time. In 2001, there were 10.9 million renters living in single-family homes, according to the Joint Center for Housing Studies at Harvard University. That number peaked at 15.2 million in 2016, and in 2021, there were 14.3 million single-family renter households, or about 33 percent of all renters. Miami, a city that has been a magnet for real estate investors and company relocations over the last few years, took the top spot as the investor share of single-family home purchases was 30.6 percent in the fourth quarter of 2022, the highest of any city in the country. It was followed by another Florida city, Jacksonville, where 26.6 percent of single-family homes were bought by investors.
Atlanta, Anaheim, California, and Charlotte, North Carolina, rounded out the top five cities with the highest percentage of investor home purchases. While these are not insignificant percentages, the total number of single-family homes purchased by investors actually fell by 25 percent year-over-year in the fourth quarter of 2022, according to CoreLogic. But investor home purchases remained a high portion of total sales due to the fact that owner-occupant home buying fell sharply as well.
The popularity of the Sunbelt with real estate investors during the pandemic years appears to still be happening, with all but one of the cities in the top five for investor home purchases part of the region. Investing in these areas makes a lot of sense. Homes in the region typically cost much less than coastal cities and are often in states with lower taxes and a lower cost of living. They are cities that have drawn a lot of new residents in recent years, and they tend to have higher amounts of uniform housing stock, especially in suburban areas.
But as more supply has entered the market, the real estate boom in the Sunbelt that was once a hallmark of the pandemic is slowing down. Multifamily rent growth in the region, particularly in Florida, peaked in 2022 and is expected to moderate over the next several quarters, according to CBRE. The two cities that have dropped from the top five, Las Vegas and Phoenix, are both in the southwest, an area that is recording record temperatures at the moment. The recent heat wave means higher utility costs and less desirable living conditions that will likely steer investment elsewhere in the coming quarters.
The single-family rental segment will be interesting to watch in the future, given how many would-be homebuyers are now renting due to rising unaffordability in home prices. Though the housing market in the U.S. is slowing down, investor purchases still make up significant shares of purchases in a lot of cities, and how that might impact the broader real estate markets of those cities will be something worth keeping an eye on.