Investors Snapping Up Record-High Number of Affordable Homes

As the debate about real estate investors’ role in the housing shortage and affordability crisis heats up, Yahoo Finance reports investors’ demand for low-priced homes is at all-time high. “In the fourth quarter [of 2023], a record 26.1% of low-priced homes were snapped up by investors, underscoring a growing trend that is reshaping real estate dynamics,” writes Kevin Vandenboss, citing data from Redfin.

Investors’ increased interest in the lower price tier is being driven by record-high home prices and high mortgage rates, as well as the potential for to build equity and increase value of those properties. And with the growing popularity of single-family REITs and “fractional ownership” (when multiple owners have divided percentage shares of a property), people are building their real estate portfolios $100 at a time. But they’re not just competing with each other for the affordable properties; they’re outbidding regular homebuyers and contributing to the already dire inventory shortage.

“Factors such as interest rates, home prices and the rental market will continue to influence investor behavior,” writes Vandenboss. However, U.S. policymakers may intervene first. In January, Democratic lawmakers from both houses of Congress introduced bills that would ban hedge funds from the single-family housing market and require them to sell off all single-family homes they own over a decade.