Investors scoop up houses

Investment Analysis Clubs Macro Economic Trends and Risks
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https://www.wsj.com/economy/housing/with-individual-home-buyers-on-the-sidelines-investors-swoop-into-the-market-f0daf356?mod=hp_lead_pos4

With Individual Home Buyers on the Sidelines, Investors Swoop Into the Market

High interest rates and prices aren’t deterring firms from snapping up single-family properties

By Rebecca Picciotto, The Wall Street Journal, July 27, 2025

  • Home prices continue to climb and interest rates are stuck in place.

  • Small investors, owning fewer than 100 homes, account for 25% of investor purchases.

  • Home builders are offering discounts to investors to reduce inventory amid a market slowdown for individual home buyers.

Individual home buyers are largely locked out of the housing market as home prices continue to climb and interest rates remain stuck. But investors are buying, and dominating the market.

So far in 2025, investors who buy homes to flip or rent out have made up about 30% of purchases of both existing and newly built single-family homes, the highest share on record…

There is also a change in the makeup of single-family residential investors, who have become a powerful force in the U.S. housing market. This buying group was once flooded with large private-equity firms such as Blackstone and Starwood Capital Group.

But in the first half of this year, small investors made up about 25% of these home purchases while large investors accounted for about 5% on average… [end quote]

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Note the increase in home purchases by investors. This is turning into a renter’s society.

Wendy

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I wonder how many of those purchases are financed with very short term debt, in the hope that Powell is successfully beat down, or out, and we go back to ZIRP?

Steve

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From the WSJ article:

But in the first half of this year, small investors made up about 25% of these home purchases while large investors accounted for about 5% on average, according to Cotality’s data. This shift happened mostly because large investors and traditional home buyers have slowed down while small investors are holding steady…

So why are smaller investors more active? For starters, even with prices and interest rates high, they still see a solid business in buying, fixing up and renting out single family homes.

Strand Capital, the small real-estate private-equity firm, targets single-family homes within the $250,000 price range. It will make about a $75,000 down payment and invest up to $15,000 in light renovations. It will then charge $2,000 to $2,200 a month in rent, with the expectation that the home price will appreciate 5% each year. After three years, Strand will try to sell the home at a profit…

Smaller firms say they can take more risk than big institutions because they don’t have to report to pension funds or other outside stakeholders. They are also benefiting because they are competing against fewer traditional home buyers who have checked out of the market because of higher prices. They might offer all-cash bids, avoiding high interest rates, and can close in a matter of weeks rather than months.

DB2

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