44% of all single-family home purchases were by private investors in 2023

In a significant change in the residential property market, private equity firms are increasingly acquiring a larger share of single-family homes, raising concerns about housing affordability and market competition.

Recent data shows that in the third quarter of 2023, these financial entities accounted for 44% of single-family home purchases, surpassing independent buyers by a wide margin, according to Medium. This surge represents a notable departure from traditional real estate dynamics and signals a new era of institutional investment.

The trend has not only sparked concern but also fear, as the growing presence of private equity raises important questions about its impact on real estate prices and its potential to sideline individual homebuyers.

A narrative is emerging that places blame for the soaring rental and housing prices, particularly in 2020-21, on "institutional investors" — a category that includes private equity firms and hedge funds. Critics argue that their competitive advantage in acquisitions may be exacerbating the affordability crisis.

Amidst the housing challenges, some view the expansion of private equity as opportunistic. The National Multifamily Housing Council, representing landlord interests, analyzed census data and found that 38% of multifamily unit owners in 2021 were individuals, while investors purchased 24% of single-family homes during the same period.

Traditionally, investment firms and financial institutions focused on multifamily properties such as apartments, leaving single-family homes largely to individual buyers. However, the aftermath of the 2009 recession saw a shift, as low property prices and interest rates created an ideal environment for investors to diversify their portfolios into what was once considered unconventional territory.

Over the following decade, the percentage of single-family homes purchased by investors grew steadily, from 10% to 15% annually. This data, compiled by CoreLogic and reported by Pew Trust, highlights the significant transformation occurring in private homeownership.