You might have heard Gov. Kathy Hochul and other politicians claim that investors are increasingly swooping in with all-cash offers to buy homes before families can.
It turns out that the opposite is true.
Statistics from Realtor.com released Tuesday show that cash sales to investors last year fell to their lowest level since 2008.
The governor had misleadingly claimed that private equity was “cornering the one- and two-family housing market in New York.”
But nationwide, large investors — buyers of 50 or more homes — accounted for about 3 percent of total sales last year, the Realtor.com report found. They also scaled back their buying, picking up 8.7 percent fewer homes than they did in 2023. The trends in New York were similar.
When politicians warn about investors, they want you to think of hedge funds and other heartless capitalists. But the Realtor.com data show that investors who purchase homes are typically mom-and-pops buying fixer-uppers to renovate and sell.
Small investors, defined as buyers of 10 or fewer homes, made nearly three times as many purchases last year (361,900) as large investors did (132,500).
These small investors accounted for 59.2 percent of investor home purchases, their highest share ever. Buyers of 50 or more homes were behind only 21.7 percent of purchases, their lowest share since 2018.
Elected officials for several years have been grabbing headlines by blaming investors for pushing up home prices and for buying and renting out homes — denying Americans the dream of home ownership.
“Shadowy private equity giants are buying up the housing supply in communities across New York, leaving everyday homebuyers with fewer and fewer affordable options,” Hochul alleged.
But in fact, investors did more selling of homes last year than the year before, the report found.
They accounted for 10.8 percent of home sales for the year, their highest share ever. Selling is an odd way to corner the market, isn’t it?
Investors still did a little more buying than selling, accounting for 13 percent of purchases. But that was the second straight year below the 2022 peak of 13.3 percent. The trend is flat if not down.
Could there be any more evidence that the governor of New York was doing her best Chicken Little impression? Yes.
In the Buffalo metro area, which Hochul calls home, investors were behind only 8.9 percent of purchases. The New York-Newark-Jersey City metro area figure was 12.7 percent, also below the national average.
Although the facts fly in the face of Hochul’s dire warnings, the governor’s message resonated with state legislators. She persuaded them to impose a 90-day waiting period for large investors to bid on one-family and two-family homes that hit the market in New York.
They also prohibited these investors — owners of 10 or more single- and two-family homes who manage at least $30 million in assets — from claiming tax deductions for depreciation or interest payments for these homes.
The idea is to give ordinary buyers who tend to need mortgages the opportunity to make a purchase before an investor beats them to the punch with a cash offer.
Reality check: Cash purchases did make up a higher share of deals last year, but not because of investors.
Although investors still used cash most of the time, they were more likely to use a mortgage last year than in 2023.
That means the increase in cash deals was driven by individual buyers. These traditional home shoppers were probably using cash because mortgage rates were relatively high, around 7 percent.
Interest rates, which are more than double what they were from 2019 to early 2022, are also the main reason more Americans have decided to rent. It’s not because they are being forced to rent by investors who have gobbled up all the inventory. Businesses are responding to consumer demand.
Other statistics, from real estate data firm Clever, contradict the political narrative that cash-wielding investors are driving up the price of homes.
Cash offers are typically for just 70 percent of market value, according to Clever, evidence that investors are not outbidding traditional buyers. Cash buyers are just offering a faster sale — 7 to 14 days, versus 85 days for purchases with mortgages.
Sellers who accept cash offers are well aware of this. They are sacrificing potential upside to get a faster, more certain sale, without the risk of a buyer failing to get a mortgage, or backing out for some other reason.
New York sellers will now have this option less often because of the waiting period established by the governor and legislature. The lawmakers solved a problem that didn’t exist, but created one for sellers who need to close quickly.
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