- We've witnessed a significant decline in institutional homebuying activity—except in this one Midwestern housing market
We've witnessed a significant decline in institutional homebuying activity—except in this one Midwestern housing market
Parcl Labs: 10 regional housing markets where institutional investors bought the most single-family homes over the last 3 months
On a national level, we've witnessed a significant decline in institutional homebuying activity. According to John Burns Research and Consulting, at the height of the pandemic housing frenzy, institutional operators, which own at least 1,000 homes, made up 2.4% of home purchase in Q2 2022 (or 1 in every 42 home purchases). While in Q2 2023, institutional landlords made up 0.4% of home purchases (or just 1 in 250 purchases).
However, there is one regional pocket where institutional investors are still busy. That’s according to data Parcl Labs, the fastest-growing player in the residential real estate data space, provided to ResiClub.
Using their robust data universe, Parcl Labs provided ResiClub a list of the 10 metro area housing markets where institutional operators (who own at least 500 U.S. single-family homes) bought the most single-family homes between mid-August and mid-November.
Here’s the data.
“Columbus, OH has been an epicenter of institutional activity during a period where acquisitions have typically come to a crawl,” says Jason Lewis, co-founder of Parcl Labs. “Acquisitions are heavily concentrated in Ohio (Columbus and Cleveland, 14.2% of all acquisitions to be precise). What's notable about the Ohio markets is these operators are paying more for homes than the rest of the market. This could be due to different buy box criteria than what's pulling through in those markets, or these markets are starting to get hot for similar units as many of these operators have similar buy box criteria.”
According to Parcl Labs, 1 in 10 U.S. single-family homes bought by institutional operators over the past three months has been in Columbus. But why?
“I spoke to a few funds that are buying in Columbus. They want to stay under the radar, but the fact is, Columbus is no longer under the radar. The truth is they are chasing yield and affordability. Not many markets have a good quality of living, are affordable, and can hit a decent profit. While there are other cities with yield, you are sacrificing in other areas like crime, lack of income growth, outbound population, etc. Columbus right now checks a lot of boxes in that people are moving there. They are pro-business, and it is affordable to live. And they [institutional operators] can deploy capital,” Christopher tells ResiClub.
Will institutional operators continue to pile into Columbus?
“Here's the thing. Now that the cat is out of the bag, what will the thesis in Columbus look like in a year? It is a market with little opportunity beyond the first movers, in my opinion. This is a tough time for SFR [single-family rental] funds. Chasing yield at all costs is not smart. Finding a market like Columbus takes a lot of work. Add higher-risk markets like St. Louis or Cincinnati if you want more value. There are plenty of opportunities. If you are willing to put more capital into the homes and take more risks on location and other dynamics, that could create more troubles down the road. A market like Columbus and others in the Midwest could see more home price appreciation, excellent jobs, and population growth for the first movers. [But] at some point, unless supply is solved, it will be short-lived,” Christopher tells ResiClub.
Christopher went on to add: “So before I poo poo the [Columbus] market, there are strong fundamentals to investing there. There are just limits on the scale and saturation. Everyone can't go in at the same time.”
An aerial shot of Columbus provided by a friend of ResiClub
There’s also the fact that Intel is currently building a $20 billion semiconductor fabrication plant in Central Ohio, says Dan Hamilton, a real estate agent who runs the Cutler Real Estate office in New Albany, Ohio. Intel is supposed to bring 10,000 well-paid direct jobs just outside Columbus proper.
“This is a game-changer for Columbus… Some of my agents have had Intel investor clients buy 5 to 10 properties here over the past year, and they’ve told us that they invested in Intel-areas previously whose [home] values were around $400K-$500K at the time (where Columbus is now), and within 5 years of Intel being there, homes were selling in the $800s-$1M. Literally they said, ‘that’s what we expect in Columbus.’ Now, I have no idea if that will actually happen,” Hamilton tells ResiClub.
This weekend, ResiClub Pro members will get access to the updated Lance Lambert House Price Tracker, which will include analysis at the metro and county levels.