Invasion of the Institutional Housing Snatchers!
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The landscape of home ownership is changing; young families and first-time buyers are struggling now more than ever to find homes in their budget. In recent years, the U.S. housing market has also seen a significant influx of institutional investors, including real estate investment trusts (REITs) and private equity firms. These entities are known for purchasing single-family homes, often transforming them into rental properties. With owner-buyers facing increased competition in an already tough housing market, some analysts are expressing concern about housing affordability and accessibility.
Institutional investors have contributed to rising home prices by creating demand, particularly in desirable neighborhoods. Their ability to pay in cash can allow them to outbid individual buyers, driving prices up. The National Association of Realtors has reported that in some markets, institutional buyers account for a notably high percentage of home purchases. This trend raises questions about the long-term effects on housing availability for average Americans.
President Donald Trump signed an executive order on January 20 to limit institutional investing in residential real estate. His order and suggested policy changes aim to curtail the expansion of these investors in the housing market, with the belief that reducing their influence may stabilize or even lower housing prices. Proponents argue that this change could help first-time homebuyers who have been struggling to enter the market due to fierce competition from well-funded institutional players.
And there are data to support this theory. Typically, investors are interested in purchasing homes below the market average. In mid-2025, the national average price per property was $512,800, with the average purchase price of large institutional investors closer to just $280,000.
Meanwhile most Americans aren’t buying until later in life as compared to times past. The median age of first-time homebuyers jumped from hovering around early 30’s in the first two decades of the millennium to higher values since the pandemic, reaching 40 in 2025.
However, the potential effects of a policy like the one President Trump has proposed are complex. While limiting institutional buying might provide some relief for individual buyers in the short term, critics argue that it could lead to unintended consequences. For example, if institutional investors are no longer active in certain markets, this might reduce overall investment in housing, which could lead to a decline in property maintenance and development. Moreover, a sudden withdrawal of institutional capital could destabilize housing markets in areas heavily reliant on rental income, affecting not just home prices, but the rental market as well.
Then there’s the question of whether institutional investors are really the problem. According to a report released in the second half of last year, owners of just one to five properties make up 87% of all investor-owned homes, suggesting that institutional investors’ market share may be overstated. And while the share of homes bought by institutional investors has been rising in recent years, the raw numbers were lower last year as compared to the previous. Overall housing sales have decreased; institutional investor purchases just haven’t decreased quite as sharply as those of individual buyers.
The role of institutional investors in the U.S. housing market is significant, and any policy aimed at restricting their influence is bound to have both immediate and long-term effects. The market’s current state is clearly challenging for many homebuyers— but the causative factors and best path forward are virtually impossible to pinpoint. As things unfold, we’ll see whether a balance can be found between promoting homeownership for individuals while maintaining a healthy investment environment.
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