\n(NASDAQ: RDFN) \u2014 Roughly one of every seven (13.5%) U.S. homes sold by an investor in March sold for less than the investor bought it for, according to a new report<\/a> from Redfin (redfin.com<\/a>), the technology-powered real estate brokerage. That\u2019s comparable with February\u2019s 14.5% rate\u2014the highest since 2016. It\u2019s also nearly triple the share of a year earlier and compares with a record low of 2.8% in May. By comparison, 4.8% of overall U.S. homes that sold in March sold at a loss.<\/p>\n
\nThis is according to a Redfin analysis of county records and MLS data across 40 of the most populous U.S. metropolitan areas. Redfin defines an investor as any institution or business that purchases residential real estate, including both large companies and mom-and-pop investors.<\/p>\n
\nWhile most housing investors still reaped gains, those gains have shrunk. The typical investor who sold a home in March sold it for 45.9% more ($145,714) than the price they paid, down from 55.3% ($173,458) a year earlier and a pandemic peak of 67.9% ($199,274) in June 2022. It\u2019s important to note that gains don\u2019t necessarily equal profits. Just because an investor sold a home for $145,000 more than they paid doesn\u2019t mean they\u2019re making money because they may have spent more than that on renovating the property.<\/p>\n
\n\u201cHome flippers aren\u2019t reaping the gains they used to,\u201d said Phoenix Redfin agent Van Welborn. \u201cI recently showed one of my buyers a three-bedroom single-family home in Glendale that was listed by an investor. My client ultimately found another house they liked better, and the investor ended up losing about $20,000. The investor bought the home for $450,000 and sold it for $480,000, but put $50,000 of work into it. The house also sold below the $550,000 list price after sitting on the market for almost four months.\u201d<\/p>\n
Investors Are Losing Money as Mortgage Rates Rise, Homebuyer Demand Drops<\/b><\/p>\n
\nInvestors are making less money selling homes\u2014and losing money in some cases\u2014because the housing market has slowed dramatically in response to rising mortgage rates.<\/p>\n
\nThe average 30-year-fixed mortgage rate is 6.39%, down from the 20-year high of 7.08% in the fall, but up from 5.11% a year ago and a record low of 2.65% during the height of the pandemic in January 2021. Higher mortgage payments have eaten into investor profits, and sent the typical homebuyer\u2019s monthly payment up nearly $300 from a year ago, which has slowed homebuying demand and pushed down sale prices. As a result, the share of investor-owned homes selling at a loss has increased. While many investors buy homes in cash, they\u2019re still sensitive to high interest rates because they often take out loans to get that cash.<\/p>\n
\n\u201cYou might wonder why investors don\u2019t just wait to sell until the housing market bounces back. Many long-term investors who rent their properties out are doing that, but many flippers\u2014especially those who bought recently\u2014can\u2019t afford to,\u201d said Redfin Senior Economist Sheharyar Bokhari. \u201cHolding onto homes that aren\u2019t producing income can be expensive because the owner is on the hook for property taxes, along with operating costs and monthly mortgage payments in some cases. Many short-term investors are also opting to sell because they know prices may have more room to fall and want to cut their losses.\u201d<\/p>\n
\nRoughly one in five (20.8%) homes sold by flippers in March sold at a loss, higher than the 13.5% share for investors overall. For the purposes of this analysis, Redfin defines a flipper as an investor that bought a home and resold it within nine months.<\/p>\n
\nInvestors who rent out their properties are also seeing their returns shrink in some areas. The median U.S. asking rent fell 0.4% year over year in March\u2014the first annual drop in three years\u2014and 13 major metros saw larger declines. Owners of short-term rentals are getting hit as well. The Airbnb market is oversaturated with supply, and authorities are imposing tougher restrictions on hosts, driving some to sell, Redfin agents said.<\/p>\n
\nOverall, investor activity has fallen significantly from the height of the pandemic, when record-low mortgage rates and soaring homebuyer demand drove up investor purchases. Redfin recently reported that investor purchases declined a record 46% year over year in the fourth quarter.<\/p>\n
Investors Are Most Likely to Sell at a Loss in Phoenix, Las Vegas<\/b><\/p>\n
\nIn Phoenix, 30.7% of homes sold by investors in March sold at a loss\u2014the highest share of the 40 metros Redfin analyzed and more than double the national rate. Next came Las Vegas (28%), Jacksonville, FL (20.9%), Sacramento, CA (20.2%) and Charlotte, NC (17.4%).<\/p>\n
\nThe markets where investors are most likely to lose money are the places where home purchases\u2014by investors and individual house hunters alike\u2014soared during the pandemic. Many of those markets are also on the list of housing markets that are now cooling fastest. Pandemic boomtowns are seeing home prices and sales fall relatively quickly because housing costs surged to unsustainable levels during the pandemic, pricing out many house hunters, and elevated mortgage rates then added fuel to the fire.<\/p>\n
\nRedfin agents say that small, individual investors are often the ones offloading their properties now, while many large investment companies are waiting on the sidelines for the market to improve.<\/p>\n
\n\u201cMost of the investors I see selling now are mom-and-pop investors,\u201d said Las Vegas Redfin real estate agent Shay Stein. \u201cThey\u2019re selling because their long-term tenants are moving out, they want to put their money elsewhere, or they just want to get out because they have heartburn from 2008. The best time to sell would\u2019ve been late 2021 or early 2022, but many of them are thinking that the next best time is now because the economy and home prices could slow further.\u201d<\/p>\n
\nWhile a lot of large investors are holding onto their properties, iBuyers (instant buyers) are the exception, according to Stein. Many iBuying companies, including RedfinNow, ceased or slowed operations in the last two years and have been offloading inventory. That\u2019s likely part of the reason that some markets where iBuyers had a large presence, including Phoenix, Charlotte and Las Vegas, have seen an uptick in the share of investor-owned homes selling at a loss.<\/p>\n
\n\u201cMy colleague recently represented a couple that purchased an iBuyer home for $610,000, substantially below the $760,000 list price and the $708,200 price that the iBuyer paid for the home,\u201d Stein said. \u201cThe appraisal also came in at $680,000, so the buyers walked away with $70,000 in equity. The house sat on the market for 166 days before selling.\u201d<\/p>\n
\nInvestors are less likely to lose money in affordable areas and select South Florida markets, which have held up relatively well. In Virginia Beach, VA, 1.7% of homes sold by investors in March sold at a loss. It was followed by West Palm Beach, FL (2.4%), Miami (2.5%), Fort Lauderdale, FL (2.5%) and Warren, MI (2.6%). Affordable markets have seen housing demand fare relatively well because prices didn\u2019t overheat as much during the pandemic, and the rise in mortgage rates doesn\u2019t make as big of a dollar difference in monthly housing payments as it does in expensive areas.<\/p>\n
Investors Own 10% of Homes for Sale, Higher Than Pre-Pandemic Levels<\/b><\/p>\n
\nInvestors owned 10.1% of new listings on the market as of December, the most recent month for which listing data is available. That\u2019s down from a peak of 12.4% a year earlier, but higher than pre-pandemic levels.<\/p>\n
\nTo view the full report, including additional analysis, charts and metro-level data, please visit: https:\/\/www.redfin.com\/news\/investor-homes-sold-at-a-loss<\/a><\/p>\n About Redfin<\/b><\/p>\n \nRedfin (www.redfin.com<\/a>) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We sell homes for more money and charge half the fee. We also run the country’s #1 real estate brokerage site. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix up their home to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we’ve saved customers more than $1 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 5,000 people.<\/p>\n \nFor more information or to contact a local Redfin real estate agent, visit www.redfin.com<\/a>. To learn about housing market trends and download data, visit the Redfin Data Center<\/a>. To be added to Redfin’s press release distribution list, email press@redfin.com<\/a>. To view Redfin’s press center, click here<\/a>.<\/p>\n View source version on businesswire.com: <\/span>https:\/\/www.businesswire.com\/news\/home\/20230421005116\/en\/<\/a><\/span><\/p>\n \nRedfin Journalist Services: KEYWORDS:<\/b> Washington United States North America<\/p>\n INDUSTRY KEYWORDS:<\/b> Residential Building & Real Estate Construction & Property Professional Services Finance<\/p>\n<\/p>\n
\n
Kenneth Applewhaite, 206-588-6863
\n
press@redfin.com<\/a><\/p>\n
![\"Logo\"](\"https:\/\/mms.businesswire.com\/media\/20230421005116\/en\/1407505\/3\/Redfin_Standard_Web_Logo.jpg\"){kind=logo}
<\/td>\n<\/tr>\n