Published by REALTOR.com | July 22, 2024
Cash was king during the hypercompetitive pandemic years as investors swooped in on the housing market with wads of cash. Now, the tide is turning.
The share of investors purchasing homes with cash fell to 64% in the first quarter of 2024, according to a recent Realtor.com® report. That’s quite a difference from the fourth quarter of 2021—when a whopping 69.7% of investors purchased with no mortgage contingency to help them win ultracompetitive bidding wars—and the lowest it’s been since 2008.
This is good news for regular homebuyers, who won’t have to compete with as many investors plunking down cold, hard cash.
One reason more investors are using financing, despite surging interest rates, is because the majority are now independent investors rather than big corporations.
Small investors (defined as having purchased 10 or fewer homes since 2001) made up 62.6% of investor purchases from January to March 2024. That’s the highest small-investor share in this data’s history since 2001, according to the Realtor.com report.
The rise of mom and pop investors is a good thing, according to G. Brian Davis, real estate investor and co-founder of property management software SparkRental.
“It’s better for everyone involved that institutional money is withdrawing from the single-family home space,” he says. “It creates less artificial demand among buyers, therefore reducing some upward pressure on prices. It also leaves room for mom and pop investors to operate.”
Brie Schmidt, owner and managing broker of Second City Real Estate in Chicago, says 90% of her transactions these days are with mom and pop investors, who are more apt to use financing.
“If an investment property in your market costs $200,000, you can buy one in all cash or put 20% down and buy five properties with the same amount of money,” Schmidt says. “It makes sense to maximize your capital and acquire more cash-flowing properties through financing.”
Cash offers could also be fewer and farther between because of the economy.
“Many consumers seem to be holding on to what liquid funds they have right now and using financing so they do not become cash-poor,” says Robert Dodson, sales manager and broker at Charles Burt Realtors in Joplin, MO. “I believe that directly correlates with the state of the economy and inflation.”
