U.S. home sales unexpectedly increased in January, but investors paying in cash are squeezing out first-time buyers from the housing market amid record low inventory and higher prices. Existing home sales surged 6.7% to a seasonally adjusted annual rate of 6.50 million units last month. Sales rose in all four regions, with strong gains in the Midwest, the most affordable region. Sales jumped 9.3% in the densely populated South, which is experiencing an influx of residents from other regions as companies embrace remote work.
First-time buyers accounted for 27% of sales last month, compared to 33% a year ago. Rising mortgage rates could make home buying even less affordable for this group. Individual investors or second-home buyers, who make up many cash sales, bought 22% of homes, up from 15% a year ago. Investors are renovating, and either reselling or renting the homes to take advantage of the hot housing market. All-cash sales made up 27% of transactions compared to 19% last January.
Image by: Flo Pappert.
One in five homes resold by iBuyers Zillow, Opendoor and Offerpad in 2021 ended up being flipped to institutional investors and other private entities, "a secret pipeline" with the potential to exacerbate inventory shortages in markets where iBuyers are active, according to a Bloomberg analysis. Bloomberg's analysis of 100,000 property records compiled by Attom Data Solutions found that iBuyers were 60 percent more likely to flip homes to investors in predominantly non-white areas, with thousands of homes sold to landlords backed by KKR & Co., Cerberus Capital Management, Blackstone Inc., and other private ventures. "These companies go around saying, 'We're going to help mom and pop and inject liquidity into the market,'" Inman contributor Mike DelPrete told Bloomberg. "They don't say, 'We're going to suck up houses from the ordinary market and sell them to Wall Street.' "