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Investors slowed their pace of buying during the first three months of the year, yet their activity still amounted to the biggest share of home purchases in history, according to a new report from Redfin.
Investors continued to target Sun Belt metro areas, making up one in every three home sales in Atlanta, Jacksonville and Charlotte.
“Investor purchases remained above pre-pandemic levels, and investors bought up a larger share of America’s homes than ever before,” the report, issued Wednesday, concludes.
The analysis, however, also makes clear that the market shift — including higher borrowing costs and home prices — is impacting home buying far and wide.
“Investor home purchases are falling for the same reason overall home purchases are falling: Surging interest rates and high housing prices have made it more expensive to get a mortgage and buy a home,” said Redfin senior economist Sheharyar Bokhari.
The number of homes purchased by investors dropped 11.5 percent through March compared to the final three months of last year, according to the report. It was down 16.5 percent from the third quarter of 2021.
But the share of purchases was higher than ever, amounting to 20 percent of homes sold this year through March. That was due to a rapid slowdown in home buying overall as rates surged toward 6 percent.
“While roughly three-quarters of investor purchases are made with cash, investors are still impacted by interest rates because they often take out loans to get that cash,” Bokhari said.
The analysis looked at the 40 most populous metro areas in the U.S., and defined investors as any buyer with the word LLC, Inc, Trust, Corp or Homes.
Investor activity in each of the top 10 markets fell from the end of last year through March 2022, the report said.
“Investors are on the hunt for deals. They’re waiting for homes to linger on the market for longer,” said Jennifer Bowers, a Redfin real estate agent in Nashville. “Plus, they bought so many houses at the height of the pandemic that some amount of pullback is natural.”
Investors targeted low-priced, primarily single-family homes. The share of high-priced homes dropped by 27.1 percent in the first three months of the year, while the purchase of low-priced homes grew by 8.3 percent.
“The fact that investors are still able to grow their market share while buying fewer homes signals they’re not feeling the pain of higher interest rates as intensely as individual buyers, many of whom are getting priced out of the housing market altogether,” Bokhari said. “It also indicates that the individuals who can still afford to buy will continue to face competition from investors.”