Investors SFR Purchases Rise for First Time in Two Years

Investors are beefing up their activities in the housing market once more, snatching up almost one in five houses that sold in the first quarter and making fatter profits than ever.

Their impact on affordable housing is even more severe, with one in four properties falling into investors’ hands, a Redfin analysis has found. Low priced homes made up 47.5% of investor acquisitions. At the same time, they are moving aggressively into the market for high priced homes, purchasing 10.5% more in the first quarter than same period in 2023, or 28.5% of their total spend. Buys of mid-range homes also rose 4.7%, accounting for 24% of all investor purchases.

“The typical home bought by investors in the first quarter cost $464,560, up 9.2% from a year earlier. Investors purchased $31.3 billion worth of homes in the first quarter, up 6.6% year over year,” Redfin reported. The company said the higher cost of homes was partly due to their focus on single family homes and partly due to their growing activity in high-priced California.

Still, current activity is stabilizing after wild swings, Redfin stated, based on an analysis of 39 of the most populous metros in the U.S. In 2021, during the pandemic, investor purchasing more than doubled, then dived by nearly half in early 2023 as declining rents and home values reduced potential profits. With both now rising, investors are getting back in the market, Redfin commented.

They bought some 44,000 homes in 1Q 2024, up 0.5% from the previous year, marking the first increase since 2Q 2022. And they are making bigger profits.

“The typical home sold by an investor in March went for 55.2% more ($174,616) than the investor bought it for. That’s up from 46.3% ($146,586) a year earlier. Just 5.3% of homes sold by investors sold for a loss, down from 13.7% in March 2023,” Redfin reported.

Since 69% of investors pay cash, interest rates are less of a factor for them, accounting for their high share of the home buying market. They bought 18.7% of U.S. homes sold in the first quarter. Individual buyers, however, are often deterred by high mortgage rates – as a result of which total home purchases fell 3.9% in 1Q 2024 compared to 1Q 2023.

Even more disheartening for the average homebuyer, investors are especially targeting single family homes, buying 3.9% more than the previous year in the first quarter to make up 69% of their total spend. They grabbed 26% of low-priced homes in 1Q 2024, accounting for almost half their total spend. In contrast, their acquisitions of townhomes, condos and multifamily properties fell.

The biggest increase in investor home purchases occurred in San Jose, CA, followed by Oakland, Minneapolis, Sacramento, and San Francisco. The biggest declines were felt in Cincinnati, Baltimore, Providence, Virginia Beach, and Chicago.