National Housing Market Outlook

Investor Mania 2.0

Rick Palacios Jr photo
John Burns photo

Rick Palacios Jr

John Burns

April 4, 2021

We’ve identified 200 players driving the new hyper-data-driven, technology-fueled, and institutionally backed housing investor ecosystem. Almost none of these companies existed during the mid-2000s housing boom.

Housing Investor Mania 2.0 Categories

The following list is not 100% comprehensive given the evolving nature of the housing investor ecosystem. That said, we tried our best to include all the companies publicly advertising their participation, broken down into nine separate categories:

These investor groups are without a doubt accelerating today’s housing recovery.

Investor activity can fluctuate dramatically due to capital availability, which can quickly surge and then shut off, something we like to call “hot money.” In the last few years, and at an increasing rate during the COVID pandemic, we have seen a plethora of capital seeking investment in US housing for the following reasons:

  • COVID pushing institutional real estate investors to the safe haven of US housing
 
  • Investment diversification, with worldwide stocks at all-time highs and bond yields at all-time lows
 
  • Hedging against COVID stimulus inflation risk
 
  • Global yield chasing
 
  • The democratization of rental real estate investing, with new technologies and slick investing platforms gaining popularity among the masses
 
  • Tax incentives and less stringent regulatory hurdles
 

Watch Rick and John discuss Investor Mania 2.0’s key findings.

While we are not in an investor-induced bubble today (largely due to low rates), we see the potential for one to emerge rather quickly. Consider the following:

  • Investors purchase 20% of all homes sold nationally today (combining resale and new) and are shooting higher in many major markets and numerous secondary markets.
 
  • Investors account for a higher percentage of home sales today than during the speculative subprime bubble years in several top housing markets, including:

    • Houston, Riverside-San Bernardino, Los Angeles, Orange County, San Francisco, Seattle, Nashville, and San Jose
 
    • Many other top housing markets are close to matching investor market share peaks during the subprime bubble years.
 

History doesn’t repeat itself, but it does rhyme.

To be clear, to date we aren’t seeing the same systemic risk created by subprime loans that caused a global recession in 2008 and national home values to crash 27%. However, the prevalence of investors across most major housing markets does lead us to believe there is a potential for a home price boom in the short term. Subsequently, the odds of a more measurable price correction in the future will also rise if/when housing demand inevitably wanes or capital finds alternative outlets.

  • We still believe housing is a great investment for long-term-oriented investors, particularly rental landlords (longer investment horizon) as well as homeowners who lock in today’s 30-year mortgage rates and maintain employment.
 
  • For those whose businesses depend on rising home prices, construction volumes, and sales prices, we are entering a riskier part of the cycle.

    • Historically, tremendous fortunes have been made in periods like this, and future downturns have been weathered by those who manage their balance sheets carefully.
 

We will be monitoring investor activity as closely as we can to help our clients invest with as much clarity as possible.

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About The Author

Rick Palacios Jr photo
Rick Palacios Jr
Managing Principal, Director of Research
Rick oversees and guides JBREC’s research platform while coaching his team daily.
John Burns photo
John Burns
Chief Executive Officer
As CEO, John grows, leads, and supports a team of passionate, articulate, likable, and smart experts. Together, we solve today so our clients can navigate to tomorrow.

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