Investor home sales could boost overall inventory
A survey by Bright MLS found that investor properties accounted for more listings this spring, possibly due to fears of a looming recession.
Key points:
- Unlike a typical homeowner, investors looking to unload a second home or rental property may not be deterred by elevated interest rates.
- Even with more investor properties on the market, inventory remains low and demand will likely outpace supply in the next three months.
- First-time buyers are facing the most competition and are more likely to pay over list price.
While spring inventory remains low, investors who want to cash in their properties could be a fruitful source of new listings.
That's one of the conclusions from a new survey from Bright MLS. The multiple listing service, which serves more than 100,000 members across six states in the mid-Atlantic region and Washington D.C., surveyed its subscribers to come up with its findings.
With interest rates still elevated, many potential sellers are reluctant to put their homes on the market and give up their existing ultra-low rates. In the Bright MLS survey, the top driver of home sales this spring was a life event like marriage or divorce. Coming in at a close second, however, was investors who needed to sell a rental or second home property.
In Delaware, for example, 21.4% of March home sales were either rental or investment properties — an unusually high percentage for that area.
"This pattern suggests that people who purchased second homes or investment homes during the pandemic — particularly in coastal markets — might be looking to offload them as we head into the summer months," said Lisa Sturtevant, chief economist at Bright MLS.
Property investors could be more interested in selling soon if they think a recession is coming later this year; cashing in now may net them a better deal on their property.
Investors are also less sensitive to what's happening with mortgage interest rates. Unlike homeowners selling their primary home, investors selling a rental property or a second home don't have the same urgency to buy another property (at a higher mortgage rate), Sturtevant said.
Despite a potential uptick in investor property sales, the Bright MLS survey found buyer demand will still outstrip inventory in the next three months. More than 50% of survey respondents said buyer activity will be high to very high, while roughly the same percentage said seller activity will be low or very low.
First-time homebuyers, who generally buy less expensive homes, are facing more competition in the Bright MLS coverage area, according to the report. Those buyers were more likely to pay over list price (43.5%) than repeat buyers (35.9%). First-time buyers also had to make more offers before getting one accepted.
"First-time buyers are losing out, no matter what price point they are buying at," Sturtevant said.
Perhaps because of this competition, the report found that many potential buyers were not concerned about interest rate volatility. Nearly half of recent home buyers said they were planning to buy regardless of mortgage rates, while only about 24% were taking mortgage rates into consideration.