Mega-Investor Share of Single-Family Purchases and Home Price Appreciation by State
- The share of single-family homes purchased by investors grew from 16% in 2020 to 24% in 2021.
- Mega-investors (those who own more than 1,000 properties) have been most active where home price increases are the highest.
- The outsized presence of mega-investors raises concerns that they are driving up prices and muscling potential homeowners out of the market.
Figure 1: Share of Single-Family Homes Purchased by Mega-Investors
Figure 2: Year-Over-Year Change in Home Price Index
The year 2021 saw an unprecedented surge in real estate investment. The share of single-family homes purchased by investors went from 16% in 2020 to 24% in 2021. There was a particularly large increase in purchases by mega-investors, defined as those who own more than 1,000 properties.
Mega-investors are competitive buyers. They are attractive to sellers because they can usually tap capital markets directly, which gives them deep pockets and enables them to pay cash for 95% of transactions. However, the outsized presence of these purchasers raises concerns that they are driving up prices and muscling potential homeowners out of the market.
Figure 1 shows the state-by-state share of single-family homes purchased by mega-investors, and Figure 2 shows the year-over-year price appreciation in each state. Both maps reflect June 2022 data.
Mega-investors have been most active where price increases are the highest. States including Arizona (9% of purchases made by mega-investors), Nevada (8% of purchases made by mega-investors), Georgia (7% of purchases made by mega-investors), Florida (5% of purchases made by mega-investors) and North Carolina (5% of purchases made by mega-investors), all had price appreciation above 20%. Indeed, the correlation between the share of purchases made by mega-investors and price appreciation is 0.65, a much tighter connection than all other investor classes and prices, where the correlation hovers at 0.39.
Correlation, however high, does not imply causation. States like California, Washington, Montana, Arkansas and Hawaii also had price appreciation above 20%, but these states have few to no mega-investors. Plenty of other factors correlate with price appreciation, from population growth (0.55) or even average temperature (0.5).
We cannot say with certainty that mega-investors have no impact on prices. Any additional buyer, whether investor or not, raises demand and thereby raises prices.
How much of June’s 18% year-over-year appreciation is due to mega-investors? So far, no strong research has been able to disentangle investors from other factors that raise prices. We cannot say whether investors are a cause or consequence of appreciation. Nevertheless, the strong connection between the two cannot be dismissed.