Investors bought more homes than ever in Q2 2021, closing out repeat buyers

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Ask a typical home buyer this year and you’ll probably hear that the real estate market was completely impossible to penetrate. For months housing inventory was extremely lowand this, combined with low mortgage rates, has led to huge competition. This, in turn, led to a sharp rise in home prices, leaving buyers with no choice but to sit back, flee, or take much higher mortgage than they would like.

But it’s not just that repeat buyers are competing with each other for homes. They also have to contend with real estate investors – people who buy homes not for use but for rent to tenants on a long or short term basis.

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Investors take inventory

Real estate investors bought 67,943 homes in the second quarter of 2021, according to Redfin. That’s an increase from 59,017 homes in the first quarter and 32,873 homes a year earlier.

Real estate investors often have the advantage of having access to more money than regular buyers (especially because they tend to have equity capital from homes they already own or the ability to refinancing existing mortgages and withdrawing cash from their property to spend on new homes). Result? They can come up with higher bids, and they have the option to pay more when houses end in a rate war.

The good news is that housing inventory has grown slightly in June. Realtor.com reports that new ads are up 5.5% from June 2020 and 10.9% from May. But there is still a serious shortage of affordable homes compared to the number of people looking to buy it. And this, combined with increased competition from investors, made life very difficult for the average buyer.

Is it worth the wait to buy?

The typical buyer trying to buy a home in the near future is likely to face limited choices, fierce competition, and overpriced prices. Thus, it may be beneficial for buyers to postpone their home searches for at least a few more months and see if additional inventory is added. In fact, some buyers might wait until 2022 to start looking again.

As there are more homes to choose from for both loyal buyers and investors, prices will naturally begin to decline as supply catches up with demand. But this is unlikely to happen in the near future, and maybe not earlier than the end of the year.

The good news is that mortgage rates are likely to remain low in 2022, and possibly throughout the year. This means buyers who are sitting around today do not have to worry about missing out on an affordable home loan. Although today mortgage interest rates home prices can be low, and buyers who choose to wait can save some serious money in the process.

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