Real estate investment firms purchased 9.6% of residential homes in King County in 2021. Slightly higher percentages were recorded in Pierce and Snohomish Counties.
Those percentages follow a nationwide trend: with inflation rates rising — the Consumer Price Index recorded a 9.1% year-over-year price increase across all consumer items as of June — investors have looked to real estate acquisition to hedge against inflation, with residential rentals and their annually variable rental prices attractive to investment firms looking to get ahead of the curve.
Across the U.S., investment firms acquired 13.2% of residential homes in 2021, up from 11.8% in 2020. The tri-county area rests slightly below that national average. Independent analysis conducted by the National Association of Realtors (NAR) offers the idea that a relatively high number of households, a density of minority groups and Millennials, and a disproportionate percentage of renters are market conditions most compelling for “institutional buyers” of residential homes, defined as companies, corporations, or LLCs.
“A big portion of homes that otherwise will be sold to first-time homebuyers, institutional buyers purchase this home,” Nadia Evangelou, NAR’s senior economist, told MyNorthwest.
“We also see, for example, in areas with a higher market share of institutional buyers, they’re purchasing homes above the median price compared to all buyers, so they increase the home prices … they offer all cash. First-time homebuyers cannot compete with, for example, international buyers because first-time homebuyers … don’t have equity … They do not have this equity to make a downpayment … While rents are rising fast as well, this also means a downpayment is becoming more challenging for first-time homebuyers.”
All cash offers have obvious benefits for sellers, with institutional buyers also guaranteeing sales and waiving the inspection process, according to a NAR survey.
Institutional buyer shares are higher in areas with disproportionate numbers of renters: counties with renter shares closer to 30% recorded the highest percentages of investment acquisition. Of note, areas with relatively high numbers of institutional investments had roughly twice the number of black and minority households.
At the national level, 42% of properties sold to institutional investors were converted into rental properties, according to a NAR random sample of approximately 50,000 residential transactors. 45% were sold back or “flipped.”
More locally, a MyNorthwest analysis of King County real estate excise tax affidavits processed by the recorder’s office for June 1, 2022, through June 30, 2022, found that RedfinNow Borrower LLC acquired the most property of any buyer, purchasing 15 of the 5,630 properties recorded by the county for that month. The second most prolific buyer was the City of Seattle, purchasing 12 properties in June of 2022.