Generally speaking, new homes tend to be priced higher than existing homes. This is, again generally, true because new homes are expensive to build, they're new and shiny, and because oftentimes they're pre-sold, meaning the purchase price reflects some future value.
But interestingly enough, this relationship has just flipped in the US, for the first time in at least 25 years. Here's the chart via Charlie Bilello:
Generally speaking, new homes tend to be priced higher than existing homes. This is, again generally, true because new homes are expensive to build, they're new and shiny, and because oftentimes they're pre-sold, meaning the purchase price reflects some future value.
But interestingly enough, this relationship has just flipped in the US, for the first time in at least 25 years. Here's the chart via Charlie Bilello:
This is, of course, a national average, and every submarket and product type is naturally going to have its nuances. Still, this inversion is noteworthy for a handful of possible reasons.
One, it points to softness in the new-home market. And indeed, homebuilder sentiment is down right now.
Two, it may suggest that homebuilders are building smaller, more affordable homes, which would bring down the median price.
And three, it's an indication of the "lock-in effect" that is prevalent in the US (but that is far less of a factor in Canada, where mortgages typically renew every few years).
For homeowners who are locked in at generationally low mortgage rates, there is a huge disincentive to sell. It would mean losing buying power. So why bother, unless you really have to?
This reduces the supply of existing homes on the market.
Over the last few years, there's been growing concern around institutional buyers (namely "Wall Street") buying up too many single-family houses and then renting them out.
But as we spoke about last year, the number of homes owned in this way is actually quite small. The vast majority of homes are owner occupied. And the second largest share of owners is what you might call "small landlords." That is, people who own somewhere between 1-9 homes.
So if the specific concern is that people are out there buying houses and then renting them out, the more fruitful target would be these small landlords. But nobody seems too fussed by them, which leads me to believe that this is an instance of symbolic politics theory. In other words, it's the association with the big bad Wall Street that people don't like.
Whatever the reason, here's the data on the largest single-family house buyers in the US last year (2024) via SFR Analytics:
This is, of course, a national average, and every submarket and product type is naturally going to have its nuances. Still, this inversion is noteworthy for a handful of possible reasons.
One, it points to softness in the new-home market. And indeed, homebuilder sentiment is down right now.
Two, it may suggest that homebuilders are building smaller, more affordable homes, which would bring down the median price.
And three, it's an indication of the "lock-in effect" that is prevalent in the US (but that is far less of a factor in Canada, where mortgages typically renew every few years).
For homeowners who are locked in at generationally low mortgage rates, there is a huge disincentive to sell. It would mean losing buying power. So why bother, unless you really have to?
This reduces the supply of existing homes on the market.
Over the last few years, there's been growing concern around institutional buyers (namely "Wall Street") buying up too many single-family houses and then renting them out.
But as we spoke about last year, the number of homes owned in this way is actually quite small. The vast majority of homes are owner occupied. And the second largest share of owners is what you might call "small landlords." That is, people who own somewhere between 1-9 homes.
So if the specific concern is that people are out there buying houses and then renting them out, the more fruitful target would be these small landlords. But nobody seems too fussed by them, which leads me to believe that this is an instance of symbolic politics theory. In other words, it's the association with the big bad Wall Street that people don't like.
Whatever the reason, here's the data on the largest single-family house buyers in the US last year (2024) via SFR Analytics:
Here are the metro areas where they transacted:
And here's this same data in heat map form:
The largest buyer was Opendoor, which is a so-called iBuyer. We've spoken about this company a lot on this blog. They don't actually want to hold any of the homes they buy. Instead, they buy, renovate, and then resell as quickly as possible.
The second largest was New Western. They are a wholesaler or "double-close buyer." These buyers want to own for an even shorter period of time and sometimes never actually own the home; instead they just assign their contract. What they're trying to do is buy at a discount and then immediately turn around and sell for a profit.
Note: SFR Analytics believes that New Western's count might be meaningfully understated in the above data. The company uses lots of different LLCs and acquisition strategies and so it's hard to aggregate the data. Assigning a contract also doesn't show up in any county records, so it's kind of impossible to track these. It's just like assigning a pre-construction condominium agreement.
Even still, what this data suggests is that single-family rental funds aren't as dominant as some might think. The overall counts for all of the largest buyers also remain relatively small. Last year, over 4 million existing homes (including condominiums and co-ops) were bought and sold in the US. And this was a nearly 30-year low.
Cover photo by Michael Tuszynski on Unsplash
Here are the metro areas where they transacted:
And here's this same data in heat map form:
The largest buyer was Opendoor, which is a so-called iBuyer. We've spoken about this company a lot on this blog. They don't actually want to hold any of the homes they buy. Instead, they buy, renovate, and then resell as quickly as possible.
The second largest was New Western. They are a wholesaler or "double-close buyer." These buyers want to own for an even shorter period of time and sometimes never actually own the home; instead they just assign their contract. What they're trying to do is buy at a discount and then immediately turn around and sell for a profit.
Note: SFR Analytics believes that New Western's count might be meaningfully understated in the above data. The company uses lots of different LLCs and acquisition strategies and so it's hard to aggregate the data. Assigning a contract also doesn't show up in any county records, so it's kind of impossible to track these. It's just like assigning a pre-construction condominium agreement.
Even still, what this data suggests is that single-family rental funds aren't as dominant as some might think. The overall counts for all of the largest buyers also remain relatively small. Last year, over 4 million existing homes (including condominiums and co-ops) were bought and sold in the US. And this was a nearly 30-year low.
Cover photo by Michael Tuszynski on Unsplash
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