Investors Purchases of Single-Family Homes Drops By Almost Half
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The slowdown comes as mortgage rates rose and housing prices declined, according to real estate firm Redfin.
Since 2021, investors purchased single-family homes at remarkable rates, leaving owner-occupants with few options. But it appears times are changing.
In the fourth quarter of 2022, investors spent $31 billion purchasing 48,445 homes in 40 of the country’s largest metro areas, according to real estate company Redfin. That’s a roughly 48% decrease from more than 89,000 homes investors purchased a year earlier when they spent $54.1 billion. It’s the largest drop in investor purchasing since 2008.
Investors most often go after low-priced single-family homes. The number of single-family homes investors purchased dropped about 50%, more than other property types like condominiums and townhouses.
With mortgage rates up, there’s less demand from buyers, a Redfin report said this week. As a result, home prices have fallen 11% since they peaked in the spring of 2022. When paired together, high mortgage rates and decreasing home prices could shrink potential profits, pushing investors to pause their purchasing, the report said.
The purchasing decline will be welcome news for communities as homeowners, lawmakers and housing authorities have worked to deter investors from scooping up properties. For example, some homeowner associations have established rules like requiring owners to live in their homes for a period before they can rent them out.
Las Vegas saw the largest drop in investor purchases, dropping 67% year over year. Phoenix was a close second, followed by Nassau County in New York.
Nationwide, the total share of single-family properties going to investors has remained largely unchanged, hovering around 20%. That’s because owner-occupants are also buying fewer homes, according to the report. However, in some communities—like Atlanta and Charlotte, North Carolina—investors’ shares dropped several percentage points.
Investors may start snapping up more homes again as mortgage rates drop, but it’s unlikely they’ll return with the kind of force the market saw in 2021, according to Redfin Senior Economist Sheharyar Bokhari.
“That’s good news for individual buyers, who are still grappling with high housing costs but no longer losing bidding war after bidding war to investors,” he said in the report.
Read the full report here.