Fact or Fiction: Are Corporations Buying Up Homes in Atlanta?
Home prices across the country rose rapidly during the pandemic, and demand skyrocketed in certain markets. Many factors have been used to explain this surging market, including low mortgage interest rates, city dwellers’ desire for more square footage and larger yards, and individuals in high-cost-of-living areas fleeing to lower-cost-of-living metros.
At the same time, another hot topic of conversation has been the purchase of residential homes by Wall Street-backed landlords. This is a phenomenon that appears to have increased in markets across the U.S., but Atlanta is one of the regions where this is a particularly notable occurrence.
Is it true that corporations are buying all of the homes in Atlanta, or is this not nearly as common as news reports make it seem? If it is true, what does it mean for the average homebuyer simply looking for a house to make their home?
Let’s take a deep dive into this question to determine whether concerns about corporate ownership are overblown or justified.
Corporate Home Ownership at the National Scale
According to a MetLife Investment Management study, it is possible that 40% of single-family rental homes in the U.S. will be owned by institutional investors by 2040. The single-family rental industry really started heating up after the 2008 financial crisis, when government backing provided new opportunities for institutions to purchase foreclosed properties.
In early 2022, big institutions are thought to have owned about 5% of the single-family rentals in the United States. While some argue that these large firms are driving up home prices and rent prices in desirable markets across the country, others say that they simply cannot dictate prices in any market because they don’t control enough of the market share.
While the influx of corporate purchases in the residential market has become a renewed concern since the pandemic, it’s worth noting that institutional investors appear to be pulling back in 2023. Many have assumed that big firms would pull back from the commercial market due to the decline of office asset values. However, it appears that these Wall Street-backed firms are also slowing down on investing in residential properties due to interest rates, prices, and a number of other factors.
One of the two largest owners of properties in the Atlanta area, Invitation Homes, actually sold more homes in the first quarter of 2023 than the number of homes it bought. This starkly contrasts their activity in 2022, where they purchased a substantially higher number of single-family homes than they sold.
Another big player in the Atlanta market– American Homes 4 Rent– also sold off more SFH than they purchased. Only one year earlier, they had purchased roughly six times more homes than they sold.
Corporate Home Ownership in Atlanta
After the 2008 financial crisis, large firms purchased thousands of homes in the Atlanta metro area. According to a paper published by Brian An, an assistant professor from the Georgia Tech School of Public Policy, the purchasing of Atlanta area homes by these Wall Street firms played a “substantial” role in the declining homeownership rate of the metro area.
Though these findings look only at Atlanta and its surrounding metro area, experts believe that they could be highly relevant to other hot markets such as Charlotte and Raleigh. Both of these Sun Belt cities have seen a major uptick in home purchases by large firms. According to an investigation by The Charlotte Observer and The News & Observer in 2022, more than 40,000 single-family homes were owned by big, national corporations across the state of North Carolina.
Home Equity Loss Due to Corporate Ownership
It isn’t particularly straightforward to understand how corporate ownership of residential homes impacts the neighborhoods they operate in. According to the analysis referenced above by Bryan An, about one-quarter of the decline in homeownership in the years between 2007 and 2016 is due to the rental home industry. Homeownership was already declining in Atlanta after reaching a peak in 2004, but An wanted to analyze how corporate ownership directly contributed to the increasing decline.
Through looking at the neighborhood level and measuring the concentration of large firm ownership while adjusting for other elements that impact home purchases, Bryan An determined that about twenty-five percent of the homeownership decline was due to the rental home industry.
On average, corporate landlords caused homeownership to decline by an average of 1.3 percentage points. However, this might not sound like a very big number, but Mr. An estimates that this translates to $5 billion in property value. When you consider that these assets are used for profit for global investors and non-local shareholders, the implications of home equity loss for actual residents are quite significant.
It’s worth noting that this same research found that mom-and-pop landlords and other local Atlanta investors didn’t have an impact on the declining homeownership rates. The difference is that corporate firms hold significantly larger portfolios that make a big mark on real estate ownership in the area.
Other Considerations When It Comes to Corporate Ownership in Atlanta
While the findings in An’s study, which focuses on the period of time after the Great Recession but holds implications for our current real estate market, are quite compelling, it’s worth noting that some are pushing back against them.
The CEO of the National Rental Home Council, Dave Howard, argued that homeownership rates in the Atlanta metro are higher now than they were seven years ago in 2016. The founder of the Housing Finance Policy Center at the Urban Institute, Laurie Goodman, argued that it’s much more difficult than An’s study claims to link the decline of homeownership directly to large firm investors rather than the foreclosure crisis of 2008.
What Percentage of Homes in Atlanta Are Owned By Corporations?
When asking questions about corporate ownership of housing stock in the Atlanta area, one of the considerations to keep in mind is what percentage of homes are bought by actual people looking for a primary residence. According to the national real estate brokerage Redfin, 80% of homes in Atlanta are purchased by actual individuals who are planning to live in the home. The other 20% are purchased by corporations or investors.
Of course, this 20% refers to both large, global funds and small mom-and-pop investors looking to make a little passive income. As noted by An’s study referenced above, these two groups of investors do not have the same impact on the homeownership rates in the area.
Declining Corporate Purchases in the Atlanta Area
Those who are concerned with corporate ownership of residential properties will be interested to learn that purchases by these big firms appear to be on the decline. According to Redfin, there has been a 66% drop in purchases by investors in Q1 2023. This means that, out of the metro areas analyzed, Atlanta ties with Charlotte, North Carolina, for the second biggest drop in investor home purchases.
While corporate purchases appear to be on the decline, this doesn’t mean that they don’t add up to a substantial figure in real estate asset value. The same report from Redfin found that the collective value of homes bought by investors in Atlanta during the first quarter of 2023 was about $944 million.
The number of corporate-owned homes in the Atlanta area accounts for about one-fifth of all of the homes in the local market. However, compared to 2022, there was a 14% reduction in the share of investor-bought homes.
The Biggest Investors in the Atlanta Metro Area
Homeownership has been a key part of building family wealth for the middle class, which is why corporate ownership of single-family homes has become a topic of increasing concern. With publicly traded companies and private equity firms snatching up homes in bulk and turning them into rental properties, homeownership seems increasingly out of reach for many Atlantans and Americans.
It’s worth noting that these Wall Street-backed firms aren’t responsible for creating the affordability crisis in the Atlanta area. There are many places where blame can be placed– inflated construction costs, a generational housing shortage, and the increase in consumer demand all share some blame in rising home prices– but that doesn’t mean that the influx of cash from firms has made matters worse for the average resident.
Bulk buyers have billions of dollars in cash to put towards real estate asset purchases. According to an AJC data analysis, more than 65,000 single-family homes have been purchased by these bulk buyers in the Atlanta metro area over the last ten years.
Eleven companies have a substantial portfolio of homes in the area, with more than one thousand properties each. The two biggest players in the game own more than 10,000 homes in the Atlanta metro area– Progress Residential and Invitation Homes.
The Atlanta Journal-Constitution published a map of real estate holdings of the five biggest metro Atlanta bulk buyers– Progress Residential, Invitation Homes, Main Street Renewal, Tricon Residential, and American Homes 4 Rent. In addition to these Big Five firms, the AJC found that more than 27,000 homes were owned by other investment groups.
This map shows that firms are largely buying homes in all neighborhoods except for the wealthiest ones across the metro. While corporate ownership covers core Intown areas and far-reaching suburbs, investors focus most of their attention on places with entry-level homes and neighborhoods with large concentrations of communities of color.
How Investor Ownership Impacts Home Price in Atlanta
Home values in the Atlanta metro area have risen across the region between 2012 and 2022. However, according to an analysis conducted by the Atlanta Journal-Constitution, prices increased with greater magnitude in areas where there is a concentration of investor purchasing.
Home values appreciated nearly double the yearly rate in the thirty zip codes, home to the most properties owned by investors compared to the thirty zip codes with the lowest percentage of investor ownership.
Are you wondering why the housing market crash that so many anticipated never came to pass? Check out our recent Landis Look post about home prices in Atlanta.
Making Real Estate Moves in the Atlanta Area
Increasing home prices, news stories about corporate ownership of residential properties, and general chatter about the real estate market can understandably leave you feeling nervous about making any moves when it comes to home buying or selling.
For example, if you’re considering selling your home, you might be worried about taking on a higher interest rate as borrowing costs have increased. The truth is, though, that waiting it out isn’t necessarily the best course of action. It is historically very difficult to predict mortgage rates, and the current trajectory appears to be up. As many have pointed out, if now is the right time for you to move, you can always take advantage of potentially lower mortgage rates in the future by refinancing.
If you’re considering buying a home in Atlanta, you might be worried about corporate firm competition or low inventory due to seller reluctance. Even if you’re selling a home at the same time as buying one and you know you’ll likely have an easy time finding a buyer for your home, it’s natural to be concerned about finding yourself in the buyer’s position at the same time.
The truth is, though, there are a lot of opportunities in the Atlanta housing market, even if that means expanding your search to include all housing types, such as townhouses, condos, and newly built homes. Broadening your potential neighborhoods can also help you find more affordable and appealing options.
Are you ready to buy or sell a home in the Atlanta area? If so, we’re here to help. When you work with the Justin Landis Group, you have a full team of world-class real estate experts actively working to make your real estate dreams a reality. To get started, contact us today.