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Investor home purchases fell by 49 percent during the first three months of this year compared to 2022, according to a new report from Redfin.
That’s the steepest drop on record since Redfin began tracking investor-specific purchases in 40 major metro areas in 2000.
Overall home purchases dropped 41 percent, suggesting investors have pulled back from the market more than consumers during a period of elevated interest rates and volatile home prices.
Still, despite the quick slowdown, investors purchased 17.6 percent of all homes sold in the quarter, a share that is down slightly from a pandemic-era peak of 20.4 percent but still well above historical levels.
“While investors have pumped the brakes on home purchases, they’re still scooping up a bigger share of homes than they were before the pandemic, which can create challenges for individual buyers at a time when there are so few homes for sale,” Redfin Senior Economist Sheharyar Bokhari said in a statement.
Investor activity spiked during the pandemic, when the cost of borrowing hit record-lows. At the same time, demand for housing skyrocketed, sending the cost of rent soaring with it.
Rent growth has largely stalled or begun falling on a year-over-year basis, and borrowing costs are much higher now than they were even a year ago. That’s sent investors looking for affordable options, Bokhari said.
“Investors have gravitated toward more affordable properties due to still-high housing costs and rising mortgage rates,” he said, “which has left first-time homebuyers with fewer starter homes to choose from.”
Redfin expects the investor slowdown to continue in the second quarter, with the cost of borrowing continuing to climb.
Investors are now quickly retreating from markets they previously flooded. Investor home purchases fell 66 percent in Atlanta and Charlotte, 64 percent in Phoenix and 60 percent in Nashville.
Las Vegas, Jacksonville, Tampa and Orlando — each of them pandemic-era darlings among investors who bought upwards of one out of every three homes sold near the peak — also saw investors retreat at high levels during the first quarter.
“I rarely get offers from investors these days, and when I do, it’s a lowball offer on a house that’s been sitting for a while,” said Redfin Premier real estate agent Heather Kruayai, in Jacksonville. “Some smaller companies and mom-and-pop investors are still active in the market, but the big corporations aren’t buying anymore.”
About one in every seven homes sold by investors in March sold at a loss, according to a previous Redfin report. One in five home flippers lost money that month, the company reported.