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John M Lund Photography Inc/Getty Images This story is available exclusively to Insider subscribers. Become an Insider and start reading now. Thomas Malone says investors are attracted to areas with population growth. In June, investor purchases of single-family houses were up while occupancy buyers were down. These 20 cities have the highest ratio of investors, plus 10 with the lowest. As of Friday, the average 30-year fixed mortgage in the US sat at a whopping 7.15%.
But even as interest rates have more than doubled what they were only two years ago, the real-estate market remains steady, according to an August 15 note from Goldman Sachs.
The investment bank recently revised its house-price forecast for the year to 1.8%, up from a previously expected decline of 2.2%. The forecast is in line with the Case-Shiller National House Prices year-over-year forecast, which is a weighted average of house-price indexes for 381 metro areas. A combination of tight supply and steady demand has kept home prices stable, according to the investment bank’s note.
The big question is, who’s still buying?
When it comes to single-family homes, it’s predominantly investors, according to recent data from CoreLogic, a property-data firm that tracks real-estate transactions. In June 2023, owner-occupied purchases were down by about 40% compared to the pre-pandemic summer market in June 2019. In comparison, investor purchases, from buyers who own at least three properties, were up by 10% for the same period.
Specifically, it’s the smaller or individual investors who are in the market for property. Large real-estate firms, which include iBuyers, or companies like Zillow that use technology to make offers, were more heavily in the market in 2021 and 2022, says Thomas Malone, an economist at CoreLogic.
Smaller investors tend to be landlords and receive cash flow from rent. This means they’re likely to keep their investment in real estate, whereas larger firms may look to other asset classes or business opportunities , Malone added.
But whether they are small or large investors, they are targeting specific areas, according to the data. Overall, these are communities that saw high population growth between 2010 and 2020. Investors expect that these regions will bring high demand for rentals, he said. These areas are also seeing upticks in new construction, he added.
“The outlier in that sense, and the one that’s a bit of a head-scratcher, is California’s large presence,” Malone said. “All the others make sense as these have been hot real estate investment areas that have been hot for a very long time in terms of investment. California is a little funny because it doesn’t meet the growing-population, high-appreciation period.”
Malone’s best guess is that property prices in California saw some of the steepest drops in the country during the lockdowns, which made buying in certain areas attractive again.
There’s also a difference between the investment area and the size of the investor. For example, larger investors are most active in bigger cities and the South. They are less involved in the west. Small investors are active all around the country and make up most of the investors, he said.
The below table is based on CoreLogic public records data for single-family transactions. Investor size is defined by the number of properties they retain: three to nine properties held by a buyer are classified as small investors, 10-99 is medium, 100-999 is large, and 1,000 and more is mega. The data covers second-quarter transactions. Only metropolitan statistical areas with more than 1,000 single-family, arms-length transactions for the period were considered.
Below are the areas investors make up the least amount of purchases in.
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