28% of Texas single-family homes purchased by institutional buyers in 2021: report
AUSTIN, Texas - A recent National Association of Realtors study shows that nearly 30 percent of single-family homes purchased in Texas last year were bought not by families, but "institutional buyers".
At 26 percent, Texas has the highest rate of institutional buyers purchasing residential homes, with Georgia (19%), Oklahoma (18%), Alabama (18%) and Mississippi (17%) rounding out the top five. The national average was just 13%.
Ten Texas counties also had a higher share of institutional buyers purchasing residential homes, including Tarrant County (52%), Rockwall County (45%), Midland County (44%), Dallas County (43%), Travis County (41%), Denton County (39%), Harris County (38%), Kaufman County (38%), Williamson County (37%), and Collin County (34%).
The NAR says that an institutional buyer can take several business forms such as, but not limited to, shared equity ventures, rent-to-own programs, traditional REO/short-sale buyers, or instant buyers (iBuyers), which make an instant cash offer based on home valuation models to determine the value of a home.
The study cites 10 reasons why institutional buyers are attracted to certain areas:
- Fast household formation: in areas with more investors, the number of households rose twice as fast as areas with less investors, such as Williamson County, which has seen a 48% growth in households
- High density of minority groups: in areas with a share of investors higher than 30%, the share of Black households is 16% on average
- High density of renters: in areas with more investors, there is a higher rentership rate, such as in Travis County, which has a 41% share of investors and a 47% rentership rate
- High density of millennials: In areas with a share of investors higher than 30%, 27% of households are millennials on average, including in Travis County where 43% of households are millennials
- High income and education: Investors are buying more properties in well-educated areas where people earn higher incomes, such as in Travis County where the median income is $84,000 and 64% of households have at least a bachelor's degree and in Williamson County where the median income is $88,500 and 50% of households have at least a bachelor's degree.
- Many people moving into the area: Investors are buying properties in areas attractive to move to, such as Travis County where 22% of its residents moved in the last year and in Bexar County where 19% of residents moved in the last year.
- Fast home appreciation in affordable areas: In areas with more investors, home prices are rising faster, more than 40% on average in the past decade
- Fast rent growth: In areas with a share of investors higher than 30%, rents have increased more than 33% on average in the last decade, for example, Dallas County, which has a 43% share of investors, has seen rent grow 64% in the last decade.
- Fast home sales growth: In areas with a share of investors higher than 30%, home sales rose 70% on average in the past decade, including in Williamson County, which has seen home sales grow 126% on average in the last decade
- Lower vacancy rate: areas with more investors see a lower vacancy rate
The study also notes that 42% of the reported single-family purchases by institutional investors were converted to rentals. However, 45% were sold back or flipped.
42% of the realtors surveyed reported that institutional investors typically purchased properties that needed repair. Just over half (56%) of reasons cited that sellers sold to institutional investors were due to the cash offer or an "as-is" sale.