Institutional investors crowding iBuying purchases

About 20% of 2021 flips went towards large institutions

Institutional investors crowding iBuying purchases
Opendoor CEO Eric Wu and Offerpad CEO Brian Bair (Offerpad, LinkedIn)

Wall Street is snapping up homes at historic rates, and it appears iBuyers are a key part of investors’ acquisition plans.

A Bloomberg analysis of more than 100,000 property records showed the sale of thousands of homes last year to institutional investors through three of the largest iBuyers: Opendoor, Offerpad and Zillow. Investors were behind two of every 10 homes flipped by iBuyers, according to the report.

Transactions related to Zillow’s iBuying demise illustrate the platforms’ willingness to sell to institutional investors, which can approach home listings with all-cash offers and higher bids than many prospective homebuyers. In November, Pretium Partners agreed to pick up 2,000 homes from Zillow, expanding inventory for its single-family rental business.

But some of the homes investors are snapping up from iBuyers weren’t even listed prior to a sale, according to Bloomberg. The homes purchased by Pretium, for instance, never had a market price.

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Investors bought slightly more than 90,000 homes in the third quarter. (iStock)
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Zillow CEO Rich Barton (Credit: Barton by Steve Jennings/Getty Images for TechCrunch; iStock)
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This type of investor activity is particularly high in the Sun Belt. According to Bloomberg, approximately 40 percent of the iBuyer sales last year in the metro Atlanta area went to institutional investors. In the third quarter, institutional investors accounted for about 32 percent of home purchases in the Atlanta market altogether.

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Investors also appear to have a disproportionately strong effect in communities of color. Bloomberg’s analysis showed iBuyers were 60 percent more likely to flip homes to investors in predominantly non-white areas in Atlanta and 41 percent more likely to do the same in Phoenix.

The ability of large institutions to pay more for homes and acquire them in bulk has stoked concerns about affordability in a housing market already pricing out many buyers.

A spokesperson for Zillow told Bloomberg the company plans to sell its remaining homes to various parties, including families, nonprofits, small investors and institutional landlords. An Offerpad representative claimed most of the company’s sales are to individuals. Opendoor did not comment on the analysis.

Redfin previously reported investors accounted for 18.2 percent of home purchases across the United States in the third quarter. The figure was a jump from a 16.1 percent share in the second quarter and 11.2 percent share in 2020’s third quarter.

Redfin added that investors spent $438,770 on a typical home in the third quarter, more than $120,000 greater than the national median home price.

[Bloomberg] — Holden Walter-Warner

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