Must read: bullish stats on surging “bulk buying” of RE by hedge funds

[gzz]

Read it all!

Institutional investors now balk at buying homes in this market niche

Some of the key stats:

“More than 2 million home sales in 2021 were to all-cash buyers, up 67% from the 1.2 million in 2020 to a new record high…

Those 2 million all-cash sales accounted for 32% of all existing home sales during the year, the highest level since 2014, although still below the peak of 37% in 2012, when home prices finally bottomed out in the wake of the Great Recession.”

I believe foreclosure auctions are all-cash, and there were tons in 2012. I bet regular sales 2021 even beat the 2012 record. And it isn’t letting up:

“The share of cash sales continued to climb in the first two months of 2022, reaching an eight-year high of 36% in February.

Some of these cash buyers are owner-occupants trying to compete with deep-pocketed institutional investors, but the seemingly insatiable appetite of the institutional investors becomes clearer when looking at the share of purchases going to bulk buyers, which ATTOM defines as entities purchasing at least 10 properties a year.

These bulk buyers purchased more than half a million homes in 2021 (530,025), also a new record high and more than twice the number purchased in 2020 (205,934) or in the pre-pandemic market of 2019 (258,780). The bulk buyer purchases accounted for 8.4% of all home sales in 2021, the highest share since 2013.”

That’s right, super bulk buyers more than doubled in 2021, also more than double the pre-covid 2019 figure.

Given the power of momentum, these RE funds that gained 20-30% in the past 12 months (assuming no leverage, so possibly much more) will be getting more and more funding. Meanwhile trendy tech stocks are down about 60% from June 2021 (performance of ARKK).

[sdrealtor]

I’m thinking a lot of those bulk buyers are i buyers and flippers.?

Also thinking the all cash investor buyer is a smaller factor here than lower priced metro areas

Also that’s 32% that are out of the potential foreclosure pool

All interesting data points but I’m not so sure exactly what it means particularly around here

[XBoxBoy]

I’m not sure why this would be bullish. If in fact a lot of houses are being bought by hedge funds, they are also likely to be the ones heading for the exits if the market changes. If anything hedge funds buying houses makes me more fearful of a housing decline.

[gzz]

There have long been obstacles to investing to US SFH rentals.

They are an amazing asset class, but hard to bulk buy in 20-50 million chunks like stocks and bonds, buy in specific amounts, buy for foreigners, etc.

Hedge funds and SFH rental REITs are working to fix this issue.

Think of all the German insurance companies and pension funds buying bunds that pay only 0.8% now. Their excess savings are better invested here. Instead of losing about 10% the past year as yields rose from negative to .8, they could have gained 30% appreciation plus another 10% on the dollar rising.

[gzz]

SDR, are many flippers buying 10+ homes a year for cash? Probably a few, especially in cheap markets, but the ones I know use loans and don’t do that many.

I feel that flippers are becoming more prominent now partly because so few people are selling that flips are a bigger share of inventory, and also linger a tad longer by pricing at the high end. Maybe also because I am looking in greater Clairemont which has so many nice homes that need updating.

[sdrealtor]

[quote=gzz]SDR, are many flippers buying 10+ homes a year for cash? Probably a few, especially in cheap markets, but the ones I know use loans and don’t do that many.

I feel that flippers are becoming more prominent now partly because so few people are selling that flips are a bigger share of inventory, and also linger a tad longer by pricing at the high end. Maybe also because I am looking in greater Clairemont which has so many nice homes that need updating.[/quote]

There are a bunch of large flipper groups doing hundreds a year in SoCal. Typically backed by funds collected from investors. There are Mid size groups using cash they started with and have grown over the years. There are small time flippers who use cash or hard money.

10+ is a low threshold for flippers of any size beyond mom and pop

Then there are the ibuyers. Redfin, Open door etc are still active. Zillow was but they grossly mismanaged things. They bought hundreds of homes here

[gzz]

Moved.

[Author]

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