Investors smash record with 18% of home purchases

David Goldsmith

All Powerful Moderator
Staff member
A lot has been made recently on both sides of the "Wall Street buying up SFR" argument. One side says that hedge funds still represent less than one percent. But they aren't then only investors. Whether good or bad, there seems little question that the percentage of homes being bought by investors is increasing.


Investors smash record with 18% of home purchases​

90,215 homes in Q3 up 10.1% from previous quarter: Redfin​

Amid high home prices and the prospects of high returns, investors are snapping up a bigger piece of the single-family market, according to a new report from Redfin.
Redfin reports investors accounted for 18.2 percent of home purchases across the United States in the third quarter, a record for the sector. The figure marks a jump from investors’ share of 16.1 percent of home purchases in the second quarter and 11.2 percent of the sales in 2020’s third quarter.
Investors — defined in the report as any institution or business purchasing residential real estate — bought slightly more than 90,000 homes in the third quarter, up a whopping 80.2 percent from the previous year. The quarter counted $63.6 billion spent on homes, almost $5 billion more than in the second quarter.
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The investors have also shown a willingness to pay top dollar. Redfin reports investors spent $438,770 on a typical home last quarter, over $120,000 more than the national median home price.
Almost 77 percent of investor home purchases in the third quarter came in all-cash deals.

“With cash-rich investors taking the housing market by storm, many individual homebuyers have found it tough to compete,” stated Redfin Senior Economist Sheharyar Bokhari. “The good news for those buyers is that the housing market has started to cool. Bidding wars are on the decline, and if home-price growth continues to ease, we may see investors slow their roll.”

A record-high 74 percent of investor purchases in the quarter were for single-family homes. Meanwhile, less than 17 percent of purchases were for condos and co-ops, a record low.
Of the 40 metro areas analyzed by Redfin, Atlanta had the highest share of investor purchases, accounting for 32 percent of all sales in the third quarter. Phoenix and Charlotte also had more than 31 percent of all purchases made by investors, while Miami finished with the fifth-largest investor purchase share of 28.1 percent.

On the opposite end of the spectrum, Rhode Island’s Providence had the lowest share of investor purchases last quarter, accounting for 5.4 percent of home purchases.
Other notable metros to see homes snapped up by investors include Chicago (8.5 percent of Q3 purchases), Los Angeles (19.1 percent), New York (12.5 percent) and San Francisco (20.4 percent). New York stands out as one of only two metros to see a year-over-year decline in investor market share, which dropped 0.6 percent — San Jose is the other.
 

David Goldsmith

All Powerful Moderator
Staff member

Whistleblower suit based on AI accuses landlord of cheating SoCal cities​

Whistleblower lawsuit alleges Invitation Homes bilked 18 cities in Southern California out of fees, property taxes​

A Dallas-based landlord has been accused in court of buying thousands of cheap homes in Southern California after the Great Recession, fixing them up, then bilking 18 cities and counties out of millions of dollars in unpaid permit fees and property taxes.
Blackbird Special Project, owned by La Jolla businessman Neil Senturia, filed the whistleblower lawsuit against Invitation Homes in 2020 based on software that used artificial intelligence to confirm the alleged fraud, the San Bernardino Sun reported. The entity could be in line for a significant reward if the suit leads to recoveries for local governments.
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The civil complaint was unsealed by a San Diego judge late last year.
The lawsuit alleges Invitation Homes obtained building permits for less than 7 percent of the more than 6,700 single-family homes it owns in San Diego, Sacramento, Los Angeles, Moreno Valley, Riverside, Compton, Temecula, Palmdale, Lancaster, San Bernardino, Vallejo, Fontana, Murrieta, Fairfield, Perris, Yucaipa, Corona, and Rialto.

The complaint filed in a San Diego County court lists 18 cities as plaintiffs.
The vast majority of the Invitation Home renovations required permits – for demolishing and building sections of single-family homes, installing and demolishing pools, and significantly altering electrical work – that were not obtained, according to the civil complaint.
“Once the single-family homes were renovated without the required permits, Invitation Homes rented them to tenants who were unaware of the unpermitted and potentially unsafe renovations,” the lawsuit said.

Invitation Homes declined to discuss the lawsuit.
“While we cannot comment on pending litigation, we believe the allegations are without merit and we intend to vigorously defend the company,” a company spokesperson said.
The business model for the scam was simple, according to the lawsuit.

Invitation Homes bought devalued properties across the U.S. after the 2007-08 financial crisis, amassing more than 12,000 single family homes in California. It then spent about $25,000 to renovate each home before renting them out.
The alleged fraud, according to the complaint, occurred when the company ignored permitting requirements to avoid permit fees – and pushed properties into the rental market as fast as possible to avoid property tax increases.

As a result, Invitation Homes cheated California counties and cities out of millions of dollars, the complaint alleges.
Blackbird, in conjunction with Deckard Technologies, used artificial intel and “lookback” technology to access images of homes from multiple listing services to compare them with images from rental advertisements after renovations, the suit states. It includes 14 before-and-after photos of homes, mostly in Riverside County, purported to have been purchased by Invitation Homes and renovated without obtaining necessary permits.

In Moreno Valley, roughly 20 percent of homeowners have pulled permits for renovations since 2012, Invitation Homes pulled permits for less than 4 percent percent of its 526 properties in the city, the suit says.
The complaint alleges Invitation Homes has avoided safety oversight from city building inspectors, potentially putting thousands of tenants at risk
 
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