Small investors, not Wall Street, are tightening the path to homeownership

Small real estate investors are reshaping the first-time homebuyer pipeline by purchasing and holding more single-family homes, pushing rents higher and making it harder to save for a down payment, according to data published this week by property analytics firm Cotality.

The analysis, authored by Cotality Principal Economist Thom Malone, found that investors bought more properties than they sold in 2025. This comes even as the U.S. homeownership rate has remained roughly flat since 2021 at about two-thirds of households.

Instead of directly reducing homeownership, investor activity is “fracturing” the traditional transition from renting to owning by resetting rent levels, the report explained. Rental costs now consume 39% of the average American renter’s budget, or 8 percentage points more than homeowners spend on housing costs. Rents have jumped 30% in the past five years, according to Cotality data.

“Investors can now push pricing buttons in the rental market,” Malone said in the report. “This pressure is further disconnecting the rental and housing markets.”

The report comes on the heels of a push by the federal government to limit investor activity in single-family housing. In January, shortly after the Trump administration proposed a ban on large-scale institutional investors, Malone told HousingWire that the move could harm efforts to improve affordability. This could occur through a homebuilder pullback, blunting the impact of reduced demand by also reducing supply.

Last week, the House of Representatives passed the ROAD to Housing Act by a wide margin. While the revised bill prohibits investors who already own at least 350 single-family homes from buying more, it also included carve-outs for build-to-rent and renovate-to-rent projects. A proposal that would’ve required these owners to sell within seven years was not included in the House bill. The legislation now returns to the Senate for reconciliation efforts.

Small landlords drive the trend

Cotality’s data challenges the idea that large institutional investors are the primary force behind affordability pressures in the single-family market. Investors of all sizes account for roughly 30% of U.S. home sales today, but small landlords (those who own fewer than 10 homes) represent about 90% of non-owner-occupied transactions.

Conversely, institutional landlords — defined as firms with 1,000 or more homes — own only 1% to 3% of all single-family rentals, Cotality found. In six of the 10 largest U.S. metro areas, these institutional players sold more homes than they bought last year, although they bought 12.6% more than they sold at the national level.

By contrast, small “mom-and-pop” investors that dominate the market purchased 2.3% more homes than they offloaded. They are also holding properties longer. About 40% keep their homes for a decade or more, similar to owner-occupants, which allows them to influence local rent levels for extended periods.

“Price matters more to small-time landlords,” Malone said. “So, systemic hurdles such as interest rates and rising home insurance costs are passed along to renters in the form of monthly payments. This premium widens the gap further for aspiring homeowners and rarely closes. Even when costs stabilize, the savings then aren’t passed back to the renter.”

Medium investors (those that own 10 to 99) properties bought 49.5% more properties than they sold in 2025. And large investors (those that own 100 to 999) homes bought 48.3% more than they sold. But these groups continue to represent relatively small slices of the single-family rental sector.

Where investors are most active

The report highlights regional variation in investor behavior, including in high-cost states like California where first-time buyers are frequently competing against cash-heavy investors.

Nationally, owner-occupants sold 6.3% more homes than they bought last year, underscoring how price remains a key barrier for individual buyers despite a gradual rise in active inventory. In California, for example, these challenges are amplified as high prices and elevated borrowing costs make it harder for buyers using mortgages to compete with investors purchasing with cash.

A prime example can be found in the Los Angeles metro area, where large-scale investors rotated quickly through inventory and bought 50% to 60% more properties than they sold, Cotality reported. Non-investors in the region sold 6.2% more homes than they bought, mirroring the national pattern of owner-occupants leaving the market at a higher clip than they’re entering.

Other major markets where investors purchased more homes than they sold include Miami, Detroit, Atlanta and Chicago.

Short window, long impact

Cotality’s home price index forecast points to a sales price recovery beginning in 2026. With single-family home prices currently steady, the firm describes today’s conditions as a short-lived “buy low, sell high” window that’s attractive to investors building or expanding their rental portfolios.

Most investors hold properties for about six years, according to the report. While that churn technically keeps homes in circulation, many of these homes are moving between investor portfolios rather than back to owner-occupants, particularly in markets with strong rental demand.

Three-quarters of units owned by publicly traded real estate investment trusts are multifamily properties, where landlords can achieve steadier cash flow and exercise more leverage in setting baseline rental prices.

Policy efforts miss market dynamics

For mortgage lenders, real estate brokerages and single-family rental operators, the report underscores that renters’ budgets serve as the main affordability pinch point. Elevated rents and rising non-mortgage housing costs are slowing the move-up pipeline and could constrain first-time buyer demand even as for-sale inventory gradually improves.

The findings suggest that policy efforts solely targeting institutional buyers may miss the bulk of investor-driven dynamics in the single-family housing space. Small-scale investors — who often rely on conventional or non-QM financing and are more exposed to rate and insurance shocks — are a key force behind rent setting and inventory lock-in.

For policymakers, Cotality argues that understanding “who is buying what” through detailed property and investor data is critical to designing effective interventions in a market where investor and owner-occupant roles are increasingly blurred.

This article was written by Neil Pierson and generated with the assistance of HousingWire Automation. It was reviewed by a HousingWire editor before publication.