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Real estate investors were very busy in the second half of last year. A new Redfin study shows that they purchased a record share of U.S. homes in the fourth quarter.

Hi, I\'m Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

The Redfin study shows that investors bought about 80,000 homes in the fourth quarter. That\\u2019s about 18.4% of all residential real estate sales for that time period. The investor home purchase share was 17.4% in the third quarter, and 12.6% a year earlier. (1)

Share vs. Numbers

While investors accounted for a record share of residential real estate purchases in the fourth quarter, the number of homes they bought dropped about 9% from the third quarter. They purchased about 88,000 homes in Q3 compared to 80,000 in Q4.

The dip in quantity is due to the lack of inventory affecting all homebuyers. Redfin says it\\u2019s also due to typically slower sales at the end of the year.

Investors have been buying more homes despite skyrocketing home prices. Redfin says that prices were up 15% year-over-year in December. That\\u2019s pushing many potential homebuyers out of the market, and increasing demand for rentals.

It\\u2019s also pushing rents higher. Redfin says the average monthly rent for a new lease was up 14% at the end of last year.

Redfin economist Sheharyar Bokhari says: \\u201cWhile record-high home prices are problematic for individual homebuyers, they\\u2019re one reason why investor demand is stronger than ever.\\u201d She says: \\u201cInvestors are chasing rising prices because rental payments are also skyrocketing, incentivizing investors who plan to rent out the homes they buy.\\u201d

Cash is King for Investors

Most investors are also paying in cash, which reduces the overall cost of the home, and makes it hard for consumers to compete. Redfin says that 75% of investor purchases in the last quarter were paid for in cash.

Bokhari says: \\u201cIt\\u2019s tough to compete with all-cash offers, and rising mortgage rates have a smaller impact on investors because they often don\\u2019t use mortgages at all.\\u201d

Most Popular Price Category

Mid-priced homes were the most popular with investors. They made up 37% of Q4 investor purchases. Low-priced homes made up about 32% of the deals and high-priced homes about 30%.

Single-family homes were also the most popular type of home. Redfin says that three out of four investor purchases were single-family homes. Condos and coops accounted for 15%, townhouses for 6%, and small multifamilies for just under 4%.

Demand for Single-Family Homes

If you\\u2019ve been following the rental market, you know that single-family homes have surged in popularity because of the pandemic. More people can work remotely from home, and many have decided they need more space to do that. While many would like to buy a single-family home, it\\u2019s tough for a lot of consumers to afford the high prices, so they continue to rent.

The markets where investors bought the most homes were in the Sun Belt. Atlanta tops the list with investors buying 32.7% of the homes that sold in the fourth quarter. Charlotte was second with an investor share of 32%. Jacksonville was next followed by Las Vegas, and Phoenix.

Jacksonville experienced the biggest increase in homes purchased by investors. Redfin says they more than doubled from the previous year with a 157% increase.

If you\\u2019d like to see the Redfin report with data on investor activity in 40 different metros, we\\u2019ll have a link in the show notes at newsforinvestors.com.

You can also visit our Learning Center while you are there and join our network for access to our Investor Portal. It\\u2019s free to join. Members can look at sample property pro-formas, and connect with our experienced investment counselors. The portal also offers access to property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

Thanks for listening, and please remember to hit the subscribe button, and leave a review!I\'m Kathy Fettke.

Links:

1 - https://www.redfin.com/news/investor-home-purchases-q4-2021/