Investors Continue Homebuying Frenzy, a Boon to Builders
New York, NY, April 13, 2022-Investors who buy and then rent new homes are fast becoming a favorite customer of the homebuilder industry, reports the Wall Street Journal.
“The vast majority of the hundreds of thousands of new homes built last year were sold to individuals and families to live in. But rising mortgage rates are making those purchases much more expensive and could lead to a pullback in demand by those traditional buyers.
“However, investors holding billions of dollars are eager to buy these homes in bulk, a boon to homebuilders who have increased construction in recent months.
“More than one in every four houses purchased by a professional rental investor in the fourth quarter last year was a new-construction house, according to a report from John Burns Real Estate Consulting LLC and the National Rental Home Council, a landlord trade group.
“Brand new homes were just 3% of what these investors bought during the third quarter in 2019.
“Large investors have amassed some $89 billion in capital to spend on building or buying new rental homes and have deployed only about one-quarter of it, according to real-estate research and advisory firm Zelman & Associates.
“Homebuilders often choose to sell in bulk to investors because it allows them to turn a profit on new homes more quickly. Investors have more capital and can close on a large number of homes at once.
“As of February, there were 799,000 single-family homes under construction across the U.S., up 28% from a year prior, according to government figures.
“Rising mortgage rates, meanwhile, are shallowing the pool of individuals who can afford to buy new homes. The average fixed rate for a 30-year mortgage was 4.72% as of April 7, according to Freddie Mac, up from the 2.97% rate during the same month last year. Mortgage application volume fell 41% below what it was during the same week in 2021, according to the Mortgage Bankers Association.
“That makes selling to rental investors even more attractive to builders, especially those who typically sell to entry-level buyers, said Robert Dietz, chief economist at the National Association of Home Builders, a builder trade group.”