Investors Buy 27% of U.S. Homes Amid Affordability Crisis

Investors are increasingly dominating the U.S. housing market, purchasing over 25% of homes sold, a figure not seen in over five years. This surge in investor activity comes as traditional homebuyers face significant affordability challenges. The median-priced new home is increasingly out of reach for a large portion of the population, with nearly 75% of U.S. households unable to afford it by 2025. This affordability crisis has led to a situation where home sales fell last year to their lowest level in nearly 30 years.

The growing share of homes bought by investors is a direct response to the affordability crisis. Traditional buyers, who are often first-time homebuyers or those looking to upgrade, are finding it difficult to compete with investors who have deeper pockets and can often pay in cash. This trend is exacerbating the housing shortage, as investors tend to buy properties to rent out or flip, rather than to live in, further reducing the number of homes available for purchase by traditional buyers.

Nearly 27% of all homes sold in the first three months of the year were bought by investors, marking the highest share in at least five years. Between 2020 and 2023, the share of homes bought by investors averaged 18.5%. All told, investors bought 265,000 homes in the January-March quarter, an increase of 1.2% from the same period a year earlier. Despite the modest annual increase, the rise in the share of investor home purchases is more a reflection of how much the housing market has slowed as traditional buyers face growing affordability constraints.

The U.S. housing market has been in a sales slump since early 2022, when mortgage rates began to climb from pandemic-era lows. Home sales fell last year to their lowest level so far this year, as many prospective homebuyers have been discouraged by elevated mortgage rates and home prices that have kept climbing, though more slowly. As home sales have slowed, properties are taking longer to sell. That’s led to a sharply higher inventory of homes on the market, benefitting investors and other home shoppers who can afford to bypass current mortgage rates by paying in cash or tapping home equity gains.

“As traditional buyers struggle with affordability, investors with cash and financing advantages are stepping in to maintain transaction volume,” according to the report. Investors bought 1.2 million homes in 2024, up from an average of 1.1 million homes a year going back to 2020. Even so, investor-owned homes account for roughly 20% of the nation’s 86 million single-family homes. Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%. Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes. And that number could get smaller, amid signs that large institutional investors are scaling back home purchases.

Out of a group of eight of the biggest companies that own and lease single-family houses, six sold more homes in the second quarter than they bought. This trend is likely to continue as long as the affordability crisis persists. This could have long-term implications for the housing market, as it could lead to a situation where a significant portion of the housing stock is owned by investors, rather than by traditional homeowners. This could have implications for everything from property taxes to neighborhood stability, as investor-owned properties may be less likely to be maintained or occupied by long-term residents.

The impact of this trend is multifaceted. On one hand, it provides investors with a stable source of income through rental properties or profits from flipping homes. On the other hand, it pushes traditional buyers further away from the dream of homeownership, as they are forced to compete with well-funded investors. This dynamic is likely to continue as long as the affordability crisis persists, with investors snapping up a growing share of the market and traditional buyers struggling to keep up.

The affordability crisis is not a new phenomenon, but it has reached a critical point. The median home price has risen significantly in recent years, outpacing wage growth and making it increasingly difficult for the average person to afford a home. This has led to a situation where many potential buyers are forced to make compromises, such as prioritizing homes that require no renovations or settling for smaller, less desirable properties.

In conclusion, the trend of investors buying a growing share of U.S. homes is a direct response to the affordability crisis facing traditional buyers. As the median home price continues to rise, it is likely that this trend will continue, with investors snapping up a larger share of the market and traditional buyers struggling to keep up. This dynamic has significant implications for the housing market and for the broader economy, as it could lead to a situation where a significant portion of the housing stock is owned by investors, rather than by traditional homeowners.