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Just a year ago, a striking claim circulated that Wall Street investors had bought 44% of all homes in America in 2023. This kind of sensational story can easily lead to misconceptions about housing economics.
Fast forward to today, and the trend has shifted to the idea that BlackRock is snapping up homes left and right. However, a closer look reveals that it’s Blackstone driving these purchases, and they aren’t acquiring nearly as many properties as some might think.
Let’s dive deeper into the facts and continue to engage in informed conversations about these critical trends in the housing market. The chart below is very instructive.
Another way to debunk the current myth of Blackstone buying all the homes is to look at mortgage demand. Wall Street firms don’t take out mortgages to buy homes — they buy with cash. So growing mortgage demand means more homebuyers trying to get in the market. Looking at the 2024 housing market, we can see that while housing demand has been hanging around a two-year low, each time mortgage rates inch closer to 6%, a surge of eager buyers dive back in. Plus, the latest pending contract data hints at some positive trends as we moved into the second half of the year. This happens with mortgage demand growth from primary resident homebuyers, not Wall Street.
As we dive deeper into the data, it’s exciting to see that mortgage purchase application data, which forecasts sales for the next 30 to 90 days, continues to show promising improvements year over year. Once again, Wall Street isn’t pushing the growth here; it’s American primary resident homebuyers.
As it happens, according to John Burns Real Estate, even the final statistics for 2023 reveal a surprising trend: institutional homebuyers, commonly known as Wall Street, did not acquire 44% of the homes in America in 2023 or any other year. The share of homes bought by institutional buyers, which includes iBuyers, reached its highest point in 2022. Check out the chart below for a clear view of this trend.
As always, remember to be discerning about what you read online and follow the data. As you can see, even at the peak, institutional buyers were less than 5% of the market, and this year we’re about half that.
The below was published on Dec. 10, 2023
Are big Wall Street investors really buying 44% of homes this year? The answer is no — not even close. Housing inventory is near all-time lows, but big institutional investors like Invitation Homes or BlackRock aren’t to blame.
The 44% claim was made in the headline for a Medium article last week and then spread like wildfire all over social media. Congress has even jumped on the bandwagon, with Democratic lawmakers introducing bills looking to limit or ban hedge funds from buying single-family homes.
2023 has seen its share of crazy housing myths (Airbnb crash anyone?), but this might be the dumbest so far because the claim is so easy to disprove. Let’s look at the data — it will tell us everything we need to know.
The first chart below, provided by Freddie Mac, shows where large institutional buyers rank as a percentage of the marketplace. As you can see, even if you add them together with the iBuyers, they are a tiny percentage of the total homebuyers in America. In fact, institutional homebuyers (those who bought 100+ homes in a 12-month period) didn’t even reach 2.5% market share at the peak level in this data line, which goes back to the start of the century.
The overall market share of investors has grown since 2000 and is currently around 30%, as seen in the chart below, but the vast majority are small mom and pop investors.
The chart below from John Burns Real Estate is another great illustration of this point. You can see the percentage of home-buying by big investors — those with 1,000 properties or more — is tiny. Again, the bulk of home buying for many years has been Tier 1 investors, those buying 1-9 properties.
The viral story saying Wall Street has bought 44% of the single-family homes this year is laughable. The 1000-plus block buyers accounted for just 0.4% of market share in Q2.
So, to make a long, convoluted story very simple: there is nothing in the data to show that Wall Street has been the big buyer of homes in the U.S since 2000. If you want to pin the blame on someone, you’re going to have to condemn those avocado-toast-eatings kids, the Millennials, who started buying homes in 2013 and were the largest percentage of homebuyers until mortgage rates rose in 2022. Since then, Gen Xers and Baby Boomers have once again come out on top, according to the National Association of Realtors. Either way, it’s not Wall Street, but that isn’t a sexy talking point in the class warfare dialogue.
@Logan, who is spreading the 44% number and what’s their data source? Because even if you include Tier 1 buyer (1-9 units), we don’t get anywhere close to 44% investor purchases, right?
Institutional investors like Blackstone, Invitation Homes and others do own hundreds of thousands of homes. They would benefit as sellers to the tune of billions of dollars in a lower commission environment with less informed buyers. Would you mind putting the same effort that you put into defending them here into some research into whether they have any involvement in supporting the commission lawsuits? Thank you.
Logan, your take is the one that is laughable as is your research, especially your last paragraph attacking “avocado toast eating kids” as the problem. Other HW readers, do your own research and look at vinebrook homes, a private equity aka institutional investor (not hedge fund) owns a substantial number of properties in selected communities. And they could already be in your city or coming there soon to own more than enough homes to control the market!