REITs purchased 9.6% of residential homes in King County in 2021. Slightly higher percentages were recorded in Pierce and Snohomish counties.
These percentages follow a national trend: with rising inflation rates – the Consumer Price Index recorded a 9.1% year-on-year price increase for all consumer items in June – Investors have turned to property acquisition to hedge against inflation, with residential rentals and their annually variable rental prices appealing to investment firms looking to get a head start.
In the United States, investment firms acquired 13.2% of residential homes in 2021, compared to 11.8% in 2020. The tri-county area is slightly below this national average. Independent analysis conducted by the National Association of Realtors (NAR) proposes the idea that a relatively high number of households, a density of minority and millennial groups, and a disproportionate percentage of renters are the most compelling market conditions for “institutional buyers” of residential homes. , defined as businesses, corporations, or LLCs. .
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“A lot of the homes that otherwise will be sold to first-time buyers, institutional buyers are buying that home,” Nadia Evangelou, NAR’s senior economist, told MyNorthwest.
“We’re also seeing, for example, in areas with a higher market share of institutional buyers, they’re buying houses above the median price relative to all buyers, so they’re raising house prices…they’re offering all in cash. First-time home buyers cannot compete with, for example, international buyers because first-time home buyers… don’t have the equity… They don’t have that equity to make a down payment… While rents are also rising rapidly, it also means a down payment is becoming more difficult for first-time home buyers.
All cash offers have clear benefits for sellers, with institutional buyers also guaranteeing sales and forgoing the inspection process, according to an NAR survey.
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Institutional buyer shares are higher in areas with a disproportionate number of tenants: Counties with tenant shares close to 30% had the highest percentages of investment acquisition. It should be noted that areas with a relatively high number of institutional investments had about twice as many black and minority households.
Nationally, 42% of properties sold to institutional investors were converted to rental properties, according to a NAR random sample of approximately 50,000 residential traders. 45% were resold or “reversed”.
More locally, a MyNorthwest analysis of King County real estate excise tax affidavits processed by the Recorder’s Office from June 1, 2022 to June 30, 2022, found that RedfinNow Borrower LLC acquired the most property of any buyers, buying 15 of the 5,630 properties registered by the county for that month. The second most prolific buyer was the city of Seattle, buying 12 properties in June 2022.