The home market has changed radically over the last two years. Home prices rise by over 20% most months, year over year, according to the carefully followed S&P Case Shiller home price analysis. In some cities, the pace is closer to 30%.
Low mortgage rates have driven a large portion of the buying. Rates on 30-year fixed mortgages dropped below 3% last year. Those days are over. Interest rates on these loans are almost 6% today.
Ameria’s new mobility caused by the work-from-home movement, which was triggered by workplace shutdowns due to COVID-19, has allowed people to move from where they have to live to where they want to live.
These sharp price movements have brought investors into residential real estate. They buy homes not to live in them but to sell them at a profit. As home prices jumped recently, that has been profitable. Whether it is in a high-interest environment remains to be seen.
When local and first-time homebuyers hesitate, real estate investors rush in. And apparently, those investors are cashing in. Attom, a curator of land and property data, estimated in a first-quarter report that the typical return on investment was 47.2%, higher than the 37.5% return in the first quarter of 2021, and nearly 20 percentage points above the 29.4% return in the first quarter of 2019.
Still, profit margins are tightening, down from 51.6% in the fourth quarter of 2021. Similarly, gross profits on home sales in the first quarter hit $103,000, down from $107,187 in the fourth quarter. Still, first quarter profit exceeded the profit of $75,001 recorded a year earlier. Attom attributed the decline in profit margin partly to a normally slow winter buying season. Yet it noted the dip was the first quarterly drop since the fourth quarter of 2019.
At the same time, the national median home price inched up a mere 1.7%, from $315,000 in the first quarter of 2021 to $320,500 in the first quarter of this year, Attom reports, continuing to attract investors, especially in some cities
To determine the city where investors are buying up the most real estate, 24/7 Wall St. reviewed data from real estate brokerage Redfin’s report Real Estate Investors Are Buying a Record Share of U.S. Homes. Metropolitan areas were ranked based on the percentage of homes that were bought by real estate investors as a percentage of all homes bought in the fourth quarter of 2021. All other data came from Redfin.
The city where investors are buying up the most real estate is Atlanta, GA. Here are the details:
> Homes bought by investors, Q4 2021: 32.7% of all sales
> Homes bought with all cash, Q1 2021: 39.8% of all sales
> Median sale price, Apr. 2022: $430,000
> Median time on market, Apr. 2022: 14 days
Click here to read Cities Where Investors Are Buying Up the Most Real Estate
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