The Rise of Institutional Investors : A Double-Edged Sword

Jan 17, 2024

In Northwest Arkansas, a trend of large investment firms acquiring entire subdivisions has significantly impacted the housing market, posing challenges and opportunities for individual buyers and renters. This shift toward corporate homeownership is also seen nationally, representing a complex, double-edged sword in the real estate market.

According to RentCafe report, Northwest Arkansas’ single-family rental market ranks 21st in the U.S. top 100, with 538 single-family Build-to-rent (BTR) homes in NWA in 2022. Since 2020, the entry of these large investors into the Single-Family Rental (SFR) market has led to a decline in available housing inventory. SFRs, favored for their flexibility and investment appeal, cater to a diverse demographic, including privacy-seeking individuals post-COVID, downsizing baby boomers, and first-time buyers deterred by high mortgage rates. Recently, a shift has been observed with larger investors receding, allowing smaller investors and first-time home buyers to enter the market. This has slightly increased housing availability, though it remains below pre-pandemic levels. Home values have remained strong, with the average price per square foot rising to $211 in 2023.

National Trends and Statistics:

March 2023 saw investors accounting for 27% of all single-family home purchases, marginally decreasing to 26% by June. This steady presence underscores the consistency of investor engagement in the real estate market.

The report highlights a significant rise in investor activity since 2021. While there has been a slight downturn in early 2023, the level of investor activity is still above pre-pandemic levels, averaging 8 percent higher than in 2020.

A closer look at the monthly data shows that investors bought 85,000 homes in April, 98,000 in May, and 82,000 in June 2023. Compared to the same period in 2019, this represents an increase of over 43,000 purchases, signifying the growing clout of investors in the housing market.

The rise of corporate homeownership in Northwest Arkansas and nationally presents a nuanced scenario. It offers some investment opportunities and housing solutions while limiting housing availability and affordability for others. At NWALook, we will continue monitoring market trends and keeping our readers informed.

 

Source:

NABOR

CoreLogic Report 

RentCafe