Mom-and-pop investors are the backbone of the market
For as long as we can remember, mom-and-pop investors have played a crucial role in the real estate market. Their presence not only increases the supply in the marketplace but also helps in keeping inflation in check. Without these smaller investors, the CPI inflation data, especially in the shelter sector, could have been much higher. The data below clearly shows that mom-and-pop investors have consistently been the largest share of investor buyers over the years.
Despite their significant contribution, even mom-and-pop investors are feeling the impact of higher mortgage rates as they finance their purchases.
While the percentage of investors has been increasing in recent years, primary-residence mortgage buyers still dominate the market. The low housing inventory levels and the growing homeowner vacancy rate indicate the impact of mortgage demand from primary residence homebuyers.
Despite the differences in investor percentage data, the overall trend shows an increase in the percentage of investors. This growth can be attributed to a decrease in primary-residence homebuyers. The rise in rental supply has led to an increase in rental vacancy rates, which is a positive sign for combating inflation.
While questions arise about providing tax breaks to investors to increase inventory, the potential consequences on rental markets and inflation should be carefully considered. The contribution of investors to rental supply is essential in maintaining market balance and controlling inflation.
In Conclusion
Mom-and-pop investors, though often criticized for low inventory, play a vital role in the real estate market. The majority of homebuyers in the US, particularly Millennials, have been responsible for driving the market. The growing rental vacancy rate and the contribution of investors to rental supply are crucial in keeping inflation in check. Instead of blaming investors, we should appreciate their role in adding to the market’s supply and stabilizing prices.