Amateur Real Estate Investors Play the Professionals

By: Kaydee Ambas · January 30, 2023 · Reading Time: 3 minutes

Housing Market Roller Coaster

The housing market was red hot during the pandemic. The work-from-home movement prompted location reshuffles across the country, and low interest rates made for affordable financing. An uptick of investors started buying up properties as investments, often selecting homes sight-unseen using computer algorithms to assess valuations. 24% of all single-family homes sold in the US in 2021 were bought by investors.

Broad-based inflation caught up with housing price increases in 2022 as supply chain disruptions and the impact of the Russo-Ukrainian war flowed through to the general economy. Interest rates rose amid Fed policy tightening, slowing the housing market’s continued growth.

Even so, the Wall Street players continued to buy.

Individual Investor Profits

Pan now to 2023. The Fed has raised interest rates seven times since its first hike of the current series in March 2022. As mortgage rates climbed, peaking above 7% in November of last year, many would-be homebuyers exited the market, eroding support for home prices.

Many of the corporate players have reversed course in the face of declining valuations, now trying to offload investment properties they acquired in recent years.

Amateur investors and first-time buyers are playing the corporate professionals that misjudged the market — and winning.

Buy High, Sell Low

Big institutions were slow to react to the shifting tide of the housing market. For example, Opendoor Technologies (OPEN) continued to make outsized offers and snap up properties even as local investors saw trouble ahead for real estate. Holding large inventories of properties amid the current slump has Opendoor and other institutional investors such as hedge funds looking to unload these holdings. Individual investors are more than happy to buy — at discounted prices.

Amateur real estate investors are making hefty profits as big institutional players exit these buy high, sell low transactions. The influx of homes being sold at a loss is also beneficial for individuals and families looking to purchase a primary residence.

Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!

Check it out

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

TLS 1.2 Encrypted
Equal Housing Lender