If you are trying to buy a house, you may be competing with investors who want to turn the house into a rental.
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As pictured below, Redfin analysis suggests that the number of investor purchases may be dropping rapidly. Late COVID in ~2021 (OP article is about 2021) created a unique situation with a lot of interest in people want to move/upgrade/buy homes, rapidly rising home prices, and low mortgage rates. All of these things have been in decline more recently that 2021 – fewer sales, declining home value/prices, and far higher mortgage rates; leading to fewer investor purchases.
That said, investor purchases are still a notable portion of overall home sales. The rate of investor home purchases is especially high in specific locations, sometimes specific neighborhoods.
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I hope the investor who bought my dad’s house and then tore it down to put a monstrosity on the lot lost his shirt. 
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There are only two full-time residents left on my street. All the other houses are STRs. I hate Airbnb with a passion.
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The market is cooling. Of course when you talk about the US it can be different depending on region. Still I don’t see things moving quickly in my sub-division. Only one house in my sub-division is for sale at the moment.
I really dislike investors owning too much real estate. There should be limits put in place to hinder this type of investment. It is not overall good for the communities.
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A lot of communities are cracking down on short term rentals for that reason. It also removes long term rentals from the market.
I think houses are still selling in many markets. There isn’t much inventory, so things are selling but are taking longer and no bidding wars.
Airbnb’s have been a big problem for much of coastal San Diego. There are huge areas that used to be owner occupied that have now become Airbnb’s. Most of the investors do not live here and the residents have to fight to get any help from property management companies when there are loud parties.
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I don’t think they are all short term rentals but rather long term rentals in bedroom communities. there are about 5 wall street firms that are buying and renting large communities. They can also control the HOAs and let the communities go, saving themselves money.
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The limit on state and local taxes for homeowners effectively gave investment owners a tax advantage over resident owners. The investor can still deduct the property taxes (and “depreciation” of an appreciating asset) from the income as a business expense, but the homeowner, especially in a state with an income tax and high property taxes (and hence good schools, good town services) is limited to only 10K/yr deduction. In a high tax state, with an income tax to boot, that 10K is only a small proportion of the total state tax bill.
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That’s an interesting point that I had not heard. Thanks for explaining.
Exactly. And when the investor goes to sell they will structure a transaction to be some like-kind one where they can keep from having to pay taxes on the gains. I know just enough about taxes to be dangerous.
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Yup. It’s called a 1031 exchange. You just keep rolling the property into the next one (or hold onto it), or roll it into a real estate investment trust (essentially like a stock in a company whose business is investing in real estate), and you never have to pay capital gains taxes when you trade up, since you just keep trading. Eventually, the property or the REIT is left to the next generation, who inherit it at the stepped up value (meaning the valuation of the asset on the day that the owner died), and pay no capital gains taxes whatsoever. Ain’t America great? Just think how this benefits the millions and millions of hardworking blue collar and middle class families in America, you know, the ones paying all those taxes on their hard-earned hourly pay or “manager” salaries and living paycheck to paycheck! Or even all those whose only asset is the family home (250 to 500K in profit on the sale of that is excluded from capital gains taxes, too). After all, doesn’t every family in the US inherit multi-million dollar stock and real estate portfolios, that have increased by 100-fold in value over the previous generation, and pay no capital gains taxes on that tremendous generational increase in wealth? It’s obvious that when Congress passed this exclusion on capital gains tax on inherited wealth, they were just trying to protect the little guy!
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S1 and DiL are running in to this a lot – the competition from investors has lessened, but the flipper-investors who are constantly rolling one purchase into the next are really a problem.
Not only are the investors driving up prices in the tiny “starter home” sector, but we are seeing a lot of cases where the renovation is abandoned and the property offered “as is”. I never thought I’d see $300K for 2 bdr/1b houses built in 1951 with missing walls, gutted kitchens, missing ceiling fixtures. It’s nuts.
I reminded them the other day that it’s okay to abandon the idea of buying and just find a better apartment until this investor thing bottoms out – but who knows how long that will take.
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You hit the nail on the head for sure there.
There are so many bs tax loopholes in the code that only benefit the top 10-20% of the country. And a lot of times the top 1%. Generational wealth without paying their fair share of taxes is killing things.
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The new tax bill that was passed at the beginning of the previous administration was specifically designed to benefit large real estate investors. Wonder why that was?
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