\n(NASDAQ: RDFN) \u2014Investor home purchases fell 45% from a year earlier in the second quarter, outpacing the 31% drop in overall home sales, according to a new report<\/a> from Redfin (redfin.com<\/a>), the technology-powered real estate brokerage. That\u2019s the biggest decline since 2008 with the exception of the quarter before, when they dropped 48%. The decline comes as this year\u2019s relatively cool housing and rental markets makes investing in homes less attractive than it was during the pandemic-driven homebuying frenzy of 2021 and early 2022.<\/p>\n
\nThe drop in purchases has brought the total number of homes bought by investors below pre-pandemic levels. Real estate investors bought roughly 50,000 homes in the second quarter, the fewest of any second quarter in seven years, with the exception of the start of the pandemic. The data in this report is from 39 of the most populous U.S. metro areas.<\/p>\n
\nThis marks a retreat from a boom in investor activity during the pandemic, which was driven by record-low mortgage rates and huge homebuying and rental demand, creating opportunities for investors to make a lot of money.<\/p>\n
\n\u201cOffers from hedge funds have dried up; I haven\u2019t received an offer from one in a long time, except unrealistically low offers,\u201d said Las Vegas Redfin Premier<\/a> agent Shay Stein<\/a>. \u201cFrom mid-2020 until early 2022 when interest rates started going up, hedge funds bought up a ton of properties and immediately turned them into rentals, pricing out local buyers. Now a big portion of our homes are owned by investors, but they\u2019re not adding to their portfolios.\u201d<\/p>\n \nInvestor purchases declined 65% year over year in Las Vegas, Jacksonville, FL and Phoenix, the biggest drops of the metros in this analysis. Investors are pulling back quickly from the Sun Belt and Florida largely because those places had an even bigger boom in homebuying demand than the rest of the country in 2021 and early 2022, and now they\u2019re cooling fast.<\/p>\n \nIn dollar terms, the drop in investor purchases is almost as big. Investors bought a total of $36.4 billion worth of homes in the second quarter, down 42% from a year earlier. That\u2019s still above pre-pandemic levels, but dropping closer to it: Investors bought a total of $34 billion in the second quarter of 2018, and a total of $31.9 billion in the second quarter of 2019.<\/p>\n \nIn terms of market share, investors bought 15.6% of homes that were sold in the U.S. during the second quarter, down from 19.7% a year earlier and a record high of 20.4% in the beginning of 2022.<\/p>\n Limited inventory, limited demand deter investors even more than individual buyers<\/b><\/p>\n \nThe outsized drop in purchases by investors helps explain why their market share is coming down: Investors backed off from the housing market faster than individual homebuyers in the second quarter.<\/p>\n \nStubbornly high home prices and mortgage rates, limited inventory and widespread economic uncertainty have dampened housing demand and suppressed overall home sales. Those factors are an even bigger deterrent for investors, because they\u2019re in it purely for the potential to make money by flipping homes or renting them out. When housing demand is down, investors are less motivated.<\/p>\n \nAdditionally, investors themselves were deterred by high home prices and high interest rates. Roughly 7 of every 10 (71%) investor purchases were made in cash in the second quarter\u2013down from 75% a year earlier\u2014but they\u2019re still impacted by high interest rates because they often use other types of loans to cover expenses.<\/p>\n \n\u201cMoving forward, the investors who do come back may be more focused on scooping up rental properties than flipping homes,\u201d said Redfin Senior Economist Sheharyar Bokhari. \u201cAll signs point to the rental market remaining relatively strong. Home prices and mortgage rates are high enough to motivate would-be first-time homebuyers to continue renting. The typical U.S. asking rent remains quite high, just $16 shy of its all-time high, so investors who are landlords stand to earn money. Investor purchases of rental properties could be limited by some of them building new properties to rent out, though.\u201d<\/p>\n \n\u201cHome flippers may be slower to come back,\u201d Bokhari continued. \u201cThat\u2019s mainly because mortgage rates are unlikely to decline significantly in the short term, which will keep homebuying demand relatively low and discourage flippers. Plus, investors have lower-risk places to park their money right now than real estate, with high yields in the bond market.\u201d<\/p>\n \nEven if investors\u2019 market share does pick back up, their purchase volume is likely to remain low. Like other buyers, they\u2019re limited by a severe lack of listings, with homeowners locked in by relatively low mortgage rates.<\/p>\n Investors\u2019 share of new listings is falling\u2013but those who are selling are seeing big gains<\/b><\/p>\n \nHomes owned by investors are making up a smaller share of new listings on the market. Investors owned 8% of new listings in March, down slightly from 9% a year earlier and down from a peak of 13% at the end of 2021. Investors listed 36% fewer homes than a year earlier, compared with a 24% drop in overall new listings. March is the most recent month for which this data is available.<\/p>\n \nMost investors who are <\/i>still flipping homes are making money. The typical home flipper who sold a home in June sold for 61% ($188,448) more than their initial purchase price. Though that\u2019s a substantial gain, it\u2019s down from a 69% ($199,946) premium a year earlier. \u201cFlipper\u201d refers to an investor who sold a home within nine months of buying it.<\/p>\n \nJust 3% of homes sold by flippers sold at a loss in June, down from a peak of 29% in September 2022 and roughly on par with 4% a year earlier.<\/p>\n Investors most commonly buy low-priced homes<\/b><\/p>\n \nInvestors bought 23% of low-priced homes that sold in the second quarter, down from 25% a year earlier but still much higher than investors\u2019 market share for more expensive homes. They bought 11% of mid-priced homes, down from 19% a year earlier, and 14% of high-priced homes, down from 16% a year earlier.<\/p>\n \nInvestors are attracted to low-priced homes for the same reason as other homebuyers: They cost less, which is especially attractive when home prices and interest and mortgage rates remain elevated. Investors who are buying homes to flip and re-sell are doing so in hopes that they can buy low and sell higher. Small homes\u2014those with 1,400 square feet or less\u2014made up 39.2% of investor purchases in the second quarter, the highest share of any second quarter on record and down just slightly from the record high of 40.6% in the first quarter of 2023.<\/p>\n \nIn that same vein, low-priced homes make up a substantial piece of investors\u2019 homebuying pie. Low-priced homes made up 46% of investor purchases in the second quarter, up from 39% a year earlier. High-priced homes made up 31% of investor purchases, up from 29% a year earlier.<\/p>\n Single-family homes represent nearly 7 in 10 investor purchases<\/b><\/p>\n \nSingle-family homes made up 68% of investor purchases in the second quarter. That\u2019s down from 73% a year earlier, but still the lion\u2019s share of purchases by real estate investors. The decline is partly due to a lack of single-family homes for sale.<\/p>\n \nNext come condos, which made up 20% of investor purchases, up from 16% a year earlier and the highest share since 2018. Townhouses made up 7% of purchases, followed by multi-family properties, which accounted for 5%.<\/p>\n \nBut in terms of market share, investors have the highest when it comes to multi-family properties. Real estate investors purchased 31% of multi-family properties that sold in the second quarter, just shy of 32% a year earlier. Investors make up a relatively high share of multi-family purchases because those buildings are typically expensive and used as rental properties.<\/p>\n \nInvestors purchased 15% of single-family homes, down from 20% a year earlier. Investors bought roughly one out of every six condos and townhouses that sold, on par with last year.<\/p>\n \nTo view the full report, including charts, methodology and metro-level data, please visit: https:\/\/www.redfin.com\/news\/investor-home-purchases-drop-Q2-2023<\/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 in certain markets 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. Customers who buy and sell with Redfin pay a 1% listing fee, subject to minimums, less than half of what brokerages commonly charge. Since launching in 2006, we’ve saved customers more than $1.5 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\/20230830582533\/en\/<\/a><\/span><\/p>\n \nRedfin Journalist Services: KEYWORDS:<\/b> United States North America Nevada Washington Florida Arizona<\/p>\n INDUSTRY KEYWORDS:<\/b> Construction & Property Residential Building & Real Estate<\/p>\n<\/p>\n
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Kenneth Applewhaite, 206-588-6863
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press@redfin.com<\/a><\/p>\n
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