Early signs indicate that the recent surge in single-family investment comes from landlords, not flippers
Investors’ recent acquisition spree showed its first signs of slowing down in the fourth quarter of 2021. After hitting historical peaks in the second and third quarters of 2021, the share of homes purchased by investors reached its zenith last October at 26.9% of total home sales — the highest monthly percentage observed in CoreLogic data history. By November, CoreLogic data demonstrated the first decrease in investor share of total home purchases since July 2020 when the share of single-family acquisitions made by investors fell to 25.5%. Figure 1 shows that this decline was a preamble for a bigger drop in December when the investor share of home purchases fell to 20.4%. Although this figure shows a reduced proportion when compared to October 2021, the total number of homes bought last December is in line with historical investor activity in the winter months.
Investor purchases are showing signs that they may revert to pre-2021 levels. Figure 2 shows the number of purchases made by both investors and owner-occupied buyers. Based on the trend line, it would not be surprising if the investor share of total purchases ticked back up in January and February, even if the number of purchases levels off. January is historically the slowest month for owner-occupied transactions, so the investor share of overall home purchases could go up through a denominator effect. The truer test of whether the investor purchasing spree is a permanent phenomenon will be seen in the summer months when more owner-occupied buyers are on the market.
Figure 3 shows that large investors (those who retain 100 or more properties) have decreased their activity the most. Of all investor purchases made in December 2021, 20% were made by large investors, which is a 6% decrease from September 2021. In contrast, small investors with 3-10 properties and medium-size investors with 10-99 properties increased their activity in the fourth quarter of 2021 relative to historical levels. Small investors now comprise 50% of investor purchases, the same percentage that they represented in December 2019.
The overall decline in investor purchases was not concentrated in a particular price tier. Figure 4 shows investor shares by MSA price tier. Homes in the top and middle third of sales prices in their respective metropolitan areas experienced a six-percentage point drop in investor purchases between October and December of last year. Investor activity in the lowest price tier decreased five-percentage points from 24% to 19% over the same period.
Figure 5 shows the share of homes purchased by investors that were resold within six months for the period between January 2019 and June 2021. The graph shows that only 13.8% of the homes purchased by investors in June 2021 were resold by December, a 0.8% decline from June 2020 and an even steeper 1.3% drop from June 2019. Nevertheless, investors remained highly active in the second half of last year, so flipping rates may increase as data for 2022 is collected.
One signal that investor flips may pick up in the coming months can be seen in the iBuyer activity — a particular category of house flipping — illustrated in Figure 6. The blue and orange lines show that iBuying rose rapidly from May to August 2021 before declining slightly through the back half of the year. This trend is evidenced by the green line which shows iBuyers currently retain very few of their properties purchased between January 2019 and June 2021. However, post-June, many of the iBuyer purchases remained unsold. It is nearly certain that these properties will be resold during the first few months of 2022.
Throughout 2021, the investment surge mirrored house price growth, which saw an unprecedented increase in Q2 and Q3 before slowing somewhat in Q4. However, home prices also had an unexpectedly strong January, so despite showing the first signs of a slowdown, investor activity may well see an uptick in Q1 2022.
This should remind us that we should not draw firm conclusions from only a few months of data. As we move into the summer and owner-occupied buyers become more active, we will see clearer signs to indicate whether we are in a new normal or if 2021 saw an unusual surge in real estate investment.
 Using CoreLogic’s public records data, we define an investor as an entity (individual or corporate) who retained three or moreproperties simultaneously within the past 10 years.
 Price tiers pool together all MSA sales for the month and divide them into thirds based on sales price.