Smaller real estate investors are stepping into the home market even as the big guns scale back. The result? Fewer all-cash investor offers, according to a analysis of deed records.

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Investors have continued to stake out an unusually large chunk of the housing market, but fewer of them are bringing bulletproof all-cash offers to the negotiating table.

Of the homes that sold in December, investors nabbed 8.2 percent, according to a analysis of deed records. That’s up 0.4 percentage points from the same time the year before, and down from a 8.9 percent peak in investor market share in February of 2022.

Investors had made up closer to 6 percent of the market in the years prior to the pandemic, the listing portal’s records show. Investor market share fell to just above 4 percent in the early economic chaos of 2020, as government shutdowns and public fear of the virus disrupted the entire economy. 

But after this initial wavering, investors quickly bounced back into action, becoming a bigger force in the housing market than at any time in the last two decades. In those months, real estate agents described to Inman a recurring challenge where investors outbid their buyer clients with all-cash offers that aspiring first-time homeowners can rarely match.

And larger institutional buyers were a big part of that shift — until recently.

“Early in the pandemic-era boom, as housing demand skyrocketed and rents increased, larger investors edged out smaller investors, growing their share of investment purchases from 16.7 percent in July 2020 to a high of 31.8 percent in June 2022,” the report reads. “Since then, the trend has shifted back towards smaller investors.”

Over the past year, investors have scaled back their purchases, much like any other category of buyer. But if you’re one of the buyers who’s still in the market and you’re bidding on a home, it’s about as likely you’ll run into an investor bid.

What’s less likely, perhaps, is that the investor you’re up against will be presenting the seller with a locktight, all-cash offer.

A mere 67 percent of investor purchases were made in all-cash in December, down from the pandemic-era peak of 74 percent a little over a year earlier. That’s the lowest share of all-cash offers by investors since May 2008, according to the report. 

This shift appears to be driven by the scaleback in activity from bigger institutional investors. Over the past two years, 85 percent of large-investor purchases were made entirely in cash, while 67 percent of small investors avoided taking out a loan.

“These trends suggest that large investors had sufficient access to capital to compete in the hot 2021 and 2022 markets by purchasing with cash but this behavior cooled as the market cooled, enabling smaller investors to compete,” the report reads.

Over the entirety of 2022, investors grew their market share most in the South and the Midwest, the data reveals. Investor market share in Southern states rose from 9.7 percent in 2021 to 12.2 percent the following year. Midwestern states saw investor market share grow from 7.6 percent to 9.3 percent over that same period.

Nowhere did that shift play out more dramatically than in Memphis, Tennessee, which saw the fastest pace of growth in investor market share in that timespan, ultimately raising its figure to 24 percent of all sales, the highest in the nation.

Email Daniel Houston
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