Small Investors LEAD the Housing Market

Dave:
How are real estate investors thinking about and acting in today’s confusing housing market? I know we try to uncover this almost every week on every episode of On the Market, but getting actual real data about what’s going on specifically with investors isn’t always easy, but we actually got it. And today we’re diving into the most recent reports on how real estate investors are reacting to the latest market trends and how you can use these insights to guide your own investing. Hey everyone, welcome to On the Market. I’m Dave Meyer. Thank you all so much for being here. As someone who styles himself as a housing market analyst, I am always a little frustrated that the majority of news and info, like all of the reports that you see in the media on housing, pretty much always focuses on homeowners and excludes investors. And I get that most purchases, 80 to 85% are owner occupants.
These are regular homeowners, not investors, but frankly it just makes my job harder. So I’m complaining about it. But the good news is there are a few reports they come out annually or quarterly and give us some true insights into the aggregate behavior of real estate investors. And I think these reports are super valuable. And last week one such report came out from realtor.com and it is chalk full of great data that is super insightful. We’re gonna go through it today. We’ll start with national trends and we’ll talk about how investors are thinking about financing, whether they’re picking up activity or slowing down, what types of deals they’re looking for. And then of course we’re gonna get into some of the regional variations and we have a lot of great regional information about which markets are hot, where investors are concentrating their time, which will help you understand perhaps where you could invest yourself or also understand where there’s gonna be the most competition.
So we’re gonna break that all down for you today. Let’s get into it. So as I said, this data comes from realtor.com and I wanna just spend like 30 seconds here talking about what’s in this report because there aren’t that many sources that actually talk about what investors are doing in the market. This is one, but it is covering a very specific type of investor. So if you look at the methodology of what realtor’s doing, they’re basically only looking at single family homes, condos and town homes. So this doesn’t include duplexes, triplexes, quadplexes, it doesn’t include larger multi-family. And basically what realtor is trying to do is look at buy and hold investor purchases. So they’re not looking at flipping, they are not looking at wholesaling. This is just traditional more rental style investments. And they basically this by looking through all this public record, seeing who’s buying in an LLC or in a trust or in an LLP or something like that.
And I just wanna mention that because you may see, for example, Redfin puts out their own report on investor activity. The numbers might look a little different because they do include multifamily or they do include flipping. So just wanna be clear exactly what we’re talking about here in this report. So with that said, let’s jump into national real estate investor trends that are going up. And the data that we’re looking at here, it’s not the most current. These things come out annually. So what we’re gonna be doing is looking at how 2023 compared to 2024. And what we see last year is that we had a very, very modest pickup in total home purchases from 23 to 24, it was 608,000. In 2023 it went up to 610,000. So it’s basically flat, but even that is a little bit surprising, right? We hear all this news about how there’s no demand in the market, but even from 2023, which was a hotter market to 2024, which had really volatile interest rates, a lot of uncertain economic conditions, a presidential election which usually stops people from buying, we actually still saw investor activity overall pick up.
Now when we look at it that way, basically the total number of homes bought it’s flat. But when you look at it a different way, which I think is super important, which is the total share of homes that are bought by investors, that actually ticked up a little bit more from 12.7% to 13%, but it’s still below the peak of 2022. And the reason that happened, if you’re wondering how do the total number of homes stay flat that investors bought, but the share that they bought go up, well that just happens because the total number of homes went down last year. So even though investors bought the same amount of properties, homeowners bought a little bit less. And so that is one insight just right there is that even though you’re probably seeing on the news that there are less demand, there is less buyers, people aren’t participating in the housing market, that is not as true as it is for real estate investors.
Now, you know, if you were comparing 2024 back to 2021, you would see a sharp decline in the total number of purchases. But since interest rates have gone gone up, I think it’s very interesting to see that some of the people who have stayed in the market the most are investors rather than homeowners. I guess there’s a couple of things probably going on there. The first one is the lock-in effect. You typically see a lot of homeowner buyer activity happen when people are trading, right? They’re either trading from a first home, a starter home up a little bit, maybe they’re trading down and downsizing later in life. But that’s when you see a lot of activity. And right now because of that lockin effect that we talk about the time, we are probably just seeing fewer transactions there because people don’t have to sell. They are not incentivized to trade up.
Meanwhile, investors are just looking to add to their portfolio. So they’re not necessarily thinking about what are selling conditions like to acquire their next property. They are probably just looking for any sort of profitable deal that they’re able to find. And as we can see, even though there’s all this talk about how there is not cash flow or there are no deals, actually for the last two years, investors seem to be finding the same amount of deals. And I think there really important thing to consider here is that the number of home sales that we saw in 2024 is actually more than in 2019. So we’re still above pre pandemic level in terms of investor interest in the housing market. And again, this is just for single family homes and for condos and that sort of thing. And so I think that is a very notable thing that although competition has come down from 2021, a lot of investors are still operating in the market.
And this just checks out with all the anecdotal evidence I see out there. I mean we have Henry and James and Kathy on the show all the time talking about how they’re buying. Pretty much all of my friends who are real estate investors are still looking at deals. They might not be buying as many as they did in 2021, but people are still participating in the market and they’re still able to find deals. One other really cool piece of data that came out of this study that I found super encouraging for everyone specifically people listening to this podcast is that a lot is made that Wall Street is taking over the housing market. And I have tried my best to dispel that rumor because it’s just not true. There’s a different study from John Burns research and consulting. They’ve done this a million times. I’ve seen very similar studies that show similar results that large institutional investors own about two to 3% of housing units nationwide.
So it’s not that much. And this report on realtor confirms that they showed that in 20 24, 50 9% of investors purchases of all the stuff I was just talking about, 60% of it basically was from small investors. And I think that is super cool, right? That is our community at BiggerPockets and on on the market. It’s us who are still participating in the market, who are able to be creative, who are able to be a little bit more nimble, who are able to adjust to market conditions better than some of those big institutional investors. We actually saw that large investor activity fell in 2024. And what we’re seeing is smaller investors who are willing to get in there and do the hard work to make deals work in this kind of market, that’s what’s still going on. And I just find this encouraging as someone who is also doing deals and who talks about this all the time. It shows that there are deals to be done and the small investors have the opportunity right now in this type of market. So those are the biggest high level trends, but there are some other insights here about how investors are financing their deals, whether or not they’re selling that I wanna get into before we move on to the regional stuff. But we do need to take a quick break. We’ll be right back.
Welcome back to On the Market. I’m Dave Meyer here sharing with you some insights from realtor dot com’s recent report on investor activity in the housing market. We talked before the break how the total number of homes bought last year was about flat, but the share of homes was up and it was mostly due to the activity of people just like you and me, small investors out there. In this report though, there were a couple of other national level trends that I wanted to talk about. We will get to the regional trends in just a couple of minutes. But one such trend was that fewer investors are purchasing in all cash. And honestly, when I read this report, I sort of did a double take because I was shocked at how many investors we’re buying for all cash. It is about 66% and I’m sure a lot of those people refinance, but that is actually about double what the rate is in the actual housing market.
When you factor in home buyers. And according to realtor.com from 2023 to 2024, the number of investors who purchased in all cash went from 66% down to 62%. That is the lowest amount of investors purchasing for cash since 2008. And I think the basic thing that’s going on here is that people probably don’t need to buy for all cash in a way that they did. I believe that during 20 21, 22 when things were super competitive, a lot of people were finding ways to buy all cash. They’re actually companies that started during those times that would buy properties for buyers all cash and then you would basically refinance with them and they would do this for a fee so that you could create a more competitive offer if you didn’t have the liquid cash to go out and buy properties. Like most of us do not. But I think it’s telling that if fewer investors are purchasing for all cash, that means that we’re entering a less competitive environment.
And that means that folks who are just starting or regular investors like you and me, most people who are using financing to go out and buy deals, that means that you can be more competitive in this market. And this is again, what we’ve been talking about recently on the show is how a buyer’s market comes with both pros and cons. But this is one of the pros that definitely comes from a buyer’s market is that you’re gonna face less competition, not just in terms of the total of buyers, but what kind of bids those buyers are offering. And this shows again that investors are gonna be able to negotiate more on their bids. You don’t have to have this perfect bid, that’s all cash waived contingencies, no inspection, short close, like that’s what you had to do during the pandemic. That all is slowly coming down and I, I recommend to everyone listening that you adjust your own bidding strategy when you go out and try and make these acquisitions.
You adjust your own bidding strategy accordingly. So that’s one other national trend. But the other thing that I wanted to call out, ’cause I think this one is pretty important and it’s something that we need to keep an eye on and is pretty different from what we’ve seen really over the last decade or so. But what realtor says is that investor seller activity picked up and it went up to about 510,000 homes, which is not as high as it was in 2021 or 2022 when investor demand was super high. But it is well above pre pandemic levels. And when we talk about it in terms of share of total homes, which is what we were talking about before, that’s actually peak. So it’s about 11% because as you know, not a lot of people are selling homes these days. And so the fact that investors sales are picking up at a time where homeowners aren’t selling that much, it kind of makes sense that we’re seeing this peak of home sales from investors at about 11%.
And I think it’s important to break down the potential reasons why investors are selling because as I said, investors sales peaked in 2021 and 2022 I think because a lot of investors were basically cashing in right times were really good. It was an excellent time to sell. I myself decided to sell some property in the beginning of 22 because the Fed was starting to raise interest rates and I thought, you know what? It’s been a very good run. Maybe things will keep going up. They did. But I wanted to take some cash off the table and reallocate that. And I think a lot of other investors did that. Like if you had bought during the early pandemic or years before you had this massive runup in equity. And as we talk about on the show, what happens when you build equity, that’s great, you’re building your wealth, but your return on equity tends to go down.
And sometimes when you have all this equity in a home, you choose to either refinance or sell and reallocate. And I think what happened in the reason we saw so much sales in 2021 and 2022 is because there was a lot of that reallocation or perhaps older investors were saying, you know what, it’s been a great run the last 12 years. I’m gonna cash out and I’m gonna retire. Um, so I think that’s what was going on. But my guess is that what’s going on right now is that we’re entering a softening market. We have rent trends that are relatively flat, appreciation is coming in relatively flat and the majority of markets we may see a decline in housing prices. And although none of that, at least in my opinion, is a reason to panic, I think there could be two things going on. It’s actually similar ideas, but just kind of because of different reasons.
First is the reallocation of capital. That’s what I’m doing. I have a property that I’m gonna sell next week, I think, yeah, next week. Uh, because I think I’ve gotten what I need out of that property and there’s gonna be better deals ahead. So I’m selling to hold onto some cash to reallocate that. But I also think, you know, we had Jay Scott who’s on the show a lot, who I co-wrote the book Real Estate by the Numbers with. He came on the show and said something that I think is very true. He said, you know, in this kind of market where we might be entering recession, we don’t know, but it’s just a slow market, right? Whether you call it a recession or not, this is just a slow market. And he basically said if you have properties that you don’t want to hold onto for the next three to five years, you should sell them right now.
And I think that’s a little bit of what’s going on too, is that even if the properties are cash flowing, maybe you just, you know, you don’t want to slog it out with that troublesome property and it’s time to curate your portfolio a little bit. So that’s my guess of what’s going on in the market. But I think this is something that you really wanna keep an eye on one, because if you start seeing investors sell a lot, one, that will create more inventory and maybe there’s more stuff to buy. But two, anytime you see huge amounts of selling increase that can spell some challenges for the housing market. But because investors only own, you know, this 10 to 15% share of the overall market, it’s not gonna flood the market, it’s not gonna crash the market, but it is something we’re gonna wanna keep an eye on. So that, that’s one thing that everyone should take note of. But that said, acquisitions and purchases by investors are definitely still outpacing sales. So that is, it’s not like investors are just like wholesale selling all their properties. They’re still buying more than they’re selling. Just the number of sales are picking up. Alright, so that’s it for our national trends. When we come back from this quick break, I’m gonna get into some of the interesting regional trends that this report highlights. We’ll be right back.
Welcome back to On the Market, I’m Dave Meyer. Today we are reviewing realtor dot com’s investor report from June of 2025, which again compares things from 2023 to 2024. Before the break, we talked about the national trends that are being seen. But now let’s turn our attention to some of the regional trends because I am always interested in this seeing what states, what metro areas investors are most active in. And the big headline here is that investors pick affordable bustling states for investment. And I love seeing this because I, at BP Con in, what was it, 20 22, 20 23, I said that my thesis for investing was all about affordability. And I know there are sexier trendier markets, but I believe affordability is the key driving force in the housing market. And it sounds like in aggregate, investors generally agree because they’re looking for affordable places. This is places not just where investors are able to afford it, but where people can afford rent.
That creates a good symbiotic relationship between investors and their tenants. And I think that’s a, an overall good thing for investors. So where are these places? Well, I was actually surprised to see this, the number one state for investor activity in 2024 was Missouri. So, uh, St. Louis is there of course, but then Kansas City, not everyone knows this, majority of Kansas City is actually Missouri. Um, so there’s two big cities that are, are good investing cities there. So I that, that kind of makes sense to me. What’s notable about this is that in Missouri, 21% of all home purchases were for investors. And I think when you get up to that level, that’s like sort of when you start to notice, right? Because people often complain, I hear this all the time, even from friends who aren’t investors, people who are just home buyers that, oh I, you know, I got outbid by an investor or you know, investors are, are sort of ruining this neighborhood.
And in aggregate that’s probably not true. Like I said, you know, we, we see that 10 to 15% of all home sales are to investors and so that is a force in the housing market for sure. But is it dominating the housing market? No, I think when you start to get to 20%, that’s like when people start to notice. And so I would imagine that people in Missouri are starting to see competition from investors impacting the housing market. That is the only one that’s sort of over that 20% threshold, which is an arbitrary threshold I made up. But it’s something I just think about. Like I think that’s when it really starts to get people’s attention. When this narrative evolved in the media, it’s when investor purchases according to Redfin was like 20 to 23%. And so that’s why I sort of came up with that number.
The second most popular state is Oklahoma at about 19%. I’ve been, you know, boosting Oklahoma City on this podcast forever and we have Kansas, then Utah, which is I don’t think a very affordable state anymore. So that might be the exception to this, uh, trend here. Then we have Georgia, which has both affordable and unaffordable parts to it. Montana, Mississippi, Wyoming, Indiana and Alabama. So those are the top 10 there. None super surprising there. I guess Montana, Wyoming, uh, that’s a little bit surprising to me, but those have been really hot states. I wouldn’t describe those as definitely affordable. They’ve gotten pretty expensive. Maybe not the rural parts, but the cities definitely have been more expensive. But I think one of the more interesting parts of the report here is which states have seen the most growth in terms of investor activity and the number one state that’s growing the fastest in terms of investor activity really surprised me.
It is Delaware, I have been hosting this show for more than three years now. So we’ve probably done several hundred shows. I don’t know, we’re probably coming up on 500 shows. I don’t think the word Delaware has ever left my mouth when I have been hosting this show. <laugh>, we never talk about it. It went up 4% this year. Um, in terms of investor activity followed by Ohio, no surprise there. Then some expensive markets in DC and Hawaii and then Nevada. So those are the places where the investor share picked up the most. And again, that doesn’t necessarily mean that more total purchases are there. It just could mean that fewer home buyers are buying in Hawaii and DC and investors are continuing their purchasing. So state level activity is obviously fun to to talk about, but what we really care about as investors is to drill down even further.
National trends are important. They really tell us a lot about sort of the broad shifts that are happening and things that could be affecting your market state level. It’s kind of interesting, but at a metro level that’s what we really care about. So when we look at the individual markets that are seeing the highest share of investor activity, we see number one is Memphis, Tennessee. This one doesn’t surprise me at all. Memphis has been sort of an investor hotspot for a really long time now and they have nearly 24% of all home purchases go to investor. So again, that is one where you’re definitely going to notice. I think it’s really cool that what realtor.com puts in this data because this, this is something that I think I should do a better job of talking about more on the show because Memphis shows that the median home price in that city is $231,000.
But, and it’s hard to get this data, but realtor shows that the average amount investors are paying is just 126,000. So just as an example, Columbus Ohio’s on this list, that’s been a really hot market. The median home price is 340,000, but the average amount investors are paying is just 2 26, right? So that’s $110,000 less and maybe some of that savings is going into a renovation. I would guess that it is. But I think it’s important to highlight that what investors are looking for is not the median home. It’s usually something that is priced well below what that median home is. And so like I said, in Memphis, investors are paying just $126,000. So that’s probably one of the main reasons why people are so active there is because it’s super, super affordable. The other places on list number two is Oklahoma City investors are paying 1 43 in St.
Louis. Number three investors are paying one 19. Then comes Kansas City. So again, those are the two Missouri cities, St. Louis and Kansas City. Kansas City. Way more expensive than St. Louis at 2 46, Birmingham, Alabama, 1 31 Indianapolis. Where we’re going by the way, I don’t know if I’ve even mentioned it on the show, but BiggerPockets is doing a road show. I’m going around with Henry and we’re gonna be driving around the Midwest looking for cash flow. We are going to be in Indianapolis on the evening of July 16th. So if you guys want to come to a meetup that we’re hosting there, come check it out. I’ll put all the information on social media, we’ll be sending out some emails about it, but we’ll be going to Indianapolis ’cause it’s a market. I am personally very interested in investors. There are purchasing 18% and are paying 1 59.
Then we have Atlanta and Miami, two more expensive cities than San Antonio and Columbus. So similar to how we talked about how Delaware was growing the fastest, I just wanna quickly talk about where activity is picking up and declining the most. So in terms of places, the five markets that have seen the biggest uptick investor activity, we see Columbus, Cincinnati, San Diego, which is kind of confusing. Memphis and Cleveland. So again, all of them except San Diego sort of on the more affordable side of things. And three of the five in Ohio and then places where investor activity is declining the fastest is Baltimore is seeing the biggest decline. Then we’re seeing Oklahoma City, which is still up there, but we’re seeing a small decrease in the recent year. And then Tucson, Dallas and Louisville are all seeing declines as well. So that is what we got for you today on, on the market.
Hopefully you guys find this information as useful as I do. I think looking at this type of investor data is really sort of refreshing because all of the other media that we hear about, everything else we see really is talking, it seems either about homeowners or institutional Wall Street type investors. And it is very rare that we get this sort of insight into what smaller investors like you and me are doing in this market. And I think this is super insightful to tell us one, investors are still buying. There is less competition though. So to me this sort of speaks to the type of environment that we’re entering in where there are going to be more opportunities, but investors who are wise are going to be adjusting their bid strategy. They’re probably not gonna be as aggressive, they’re gonna be more patient during this period.
And this to me is encouraging as a buy and hold investor. These are the types of conditions that I think breed better acquisition opportunities than we’ve seen over the last couple of years. Hopefully some of the regional reports help you understand too, where people are buying, which is more affordable markets. That doesn’t mean that you need to buy there. That means you know pretty much any market you can find a strategy that works, like I said, outta the top five where investor activity is picking up. Yeah, a lot of them are affordable and then there’s San Diego in there. So people are clearly finding ways to invest in those more expensive markets too. But I think it sort of highlights something that I’ve been saying for a while that I think the trend is going to be towards more affordable markets. All right, that’s what we got for you today on On The Market. I’m Dave Meyer. Thank you all so much for listening to this episode. We’ll see you next time.