Real Estate Investors Target Chicago

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Real estate investors re-entered the housing market in the second quarter of 2021, and Chicago is at the top of the investor shopping list, according to a new report.

A study by online brokerage company Redfin shows that home sales to investors in the second quarter were up 208.8% over the previous year. While this percentage is somewhat of a statistical anomaly due to the 2020 pandemic lockdown, Chicago still experienced the second largest spike in investor buying from 41 major metro areas that Redfin surveyed.

Chicago ranked 6th in the nation for the number of homes sold to investors in the second quarter, with investors buying a total of 2,680 homes. This represents 10.3% of the total market at a value of $ 871.8 million, according to data Redfin

The study notes that Chicago is not alone: ​​In the second quarter of 2021, investment property purchases rose sharply across the country, up 15.1% from the previous quarter and 106.7% from a year earlier.

Nationwide, investors are paying far more than a year ago, according to the report, which noted that a typical home was purchased for $ 439,600 in the second quarter of 2021, a whopping 23.7% more than the previous year.

Roughly one in six homes in the United States was acquired by real estate investors in the second quarter of 2021. This is a return to pre-pandemic levels, when investor buying was 16.1%.

According to Shekhariar Bohari, senior economist at Redfin, rising house prices are opening up great opportunities for investors. “As home values ​​continue to rise, stable returns are largely guaranteed, especially if you are an investor with access to extremely cheap debt,” she said in the report.

They also take advantage of the fact that many first-time home buyers currently lack market prices and are forced to continue renting. “Since so many Americans do not own home ownership, investors can easily profit from buying and renting properties,” she said.

Bohari added that the return of investors to the market poses challenges for first-time homebuyers, in part because investors often bring in cash, which helps them win in multiple-supply situations. The report noted that nearly three-quarters (74%) of home purchases by investors in the second quarter were made with cash, the highest level of cash offers since 2018.

This investor money boosted the total percentage of homes purchased with cash across the country in the second quarter, bringing the statistic to a 30% increase from 25.3% for all of 2020.

Investors acquired about 26.5% of all apartment buildings in the second quarter, up from 33.3% in 2019. They also accounted for 16.1% of single family home sales and 15.1% of condominium sales for the quarter. This is up from 9.4% and 12.4%, respectively, during the pandemic.

Inexpensive homes have historically been and remain the preferred type of housing for investors. They accounted for 21.2% of low-cost home sales in the second quarter, 13.8% of mid-price home purchases and 13.5% of high-end homes.
While Chicago was a hot market for investment real estate, Phoenix and Miami are the two hottest spots for investors, according to Redfin. Investors accounted for almost a quarter of all home sales in the second quarter.

The study notes that the pandemic has exacerbated the tendency for homeowners to move from large urban centers to mid-size cities, but many home buyers, especially first-time homebuyers, have no value in these markets.

“House prices in Phoenix are skyrocketing, which means that many longtime residents have been thrown out of market prices and need to rent them. Investors move in, buy homes and turn them into leases, ”said Christie Penrod, Redfin’s designated broker in Phoenix. “Phoenix still seems to be relatively inexpensive for many investors, especially those doing business in more expensive cities like San Francisco or New York.”

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