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Builders Bypass Individual Buyer for Big Investors

Study: Over 25% of houses bought by professional rental investors in 4Q 2021 were new-construction properties. In 3Q 2019, they bought 3% of newly built homes.

NEW YORK – A study by John Burns Real Estate Consulting and the National Rental Home Council found over 25% of houses purchased by professional rental investors in the fourth quarter of 2021 were for new-construction properties.

By contrast, such parties bought only 3% of brand-new homes in the third quarter of 2019.

Home builders often sell in bulk to investors in order to turn a profit on new homes more quickly, since investors have more capital and can close on a large number of homes in one go.

There were 799,000 single-family homes under construction across the nation as of February, up 28% year-to-year.

The number of individual homebuyers who can afford new homes is shrinking due to climbing mortgage rates, and National Association of Home Builders chief economist Robert Dietz said this makes rental investors even more appealing to builders, especially those who typically sell to entry-level clients.

“Those potential buyers still want more space,” he explained. “And so single-family rental is likely to continue to show some strength.”

Moreover, investors offer a reliable sale even if interest rates increase, since many already have cash on hand. Many of the new homes that investors now purchase were originally designed to be rentals, but most are homes builders later opt to sell to rental companies.

Source: Wall Street Journal (04/11/22) Parker, Will

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