Investor Share of Home Purchases Close to Record

Investors are coming off the sidelines more quickly than individual buyers in the U.S. home market. During the second quarter, investors purchased 16.8% of U.S. homes, the highest second-quarter share on record aside from 2022. That’s down from an all-time high of 20.8% hit during the pandemic but up from 16% a year earlier, according to Redfin.

While investor home purchases rose 3.4% in the second quarter, overall U.S. home purchases fell 1.9% as elevated mortgage rates and prices deterred buyers, the firm said. Generally, investors are less sensitive to mortgage rate fluctuations than regular buyers because most pay in cash, but they are subject to rate fluctuations on loans they take to cover flipping and other expenses.

Investors purchased $43 billion worth of homes in the second quarter, also representing a two-year high. Redfin said this trend represents a market stabilization following several years of dramatic ups and downs, including double-digit increases in investor home purchases during the pandemic followed by a near 50% plunge last year.

“One reason real estate investors are coming out of hibernation is to take advantage of robust demand from renters,” said Redfin senior economist Sheharyar Bokhari. “Elevated home prices and mortgage rates have pushed homeownership out of reach for a lot of Americans, which is fueling demand for rentals. Investors, many of whom can afford to pay in cash to avoid the sting of high mortgage rates, are cashing in on that demand.”

Homeownership remains out of reach for many Americans even with increasing buying power triggered by lower mortgage rates this year, Redfin said. However, while renter demand is strong, rents have been sluggish as a wave of new apartments come to market following the pandemic-era construction boom. With apartment construction slowing, rents could soon rebound, the company said.

Single-family home purchases are driving the increase in investor activity, noted Redfin. Investor purchases of single-family homes rose 6.7% year-over-year in the second quarter, the biggest increase in two years. Meanwhile, investor purchases of multifamily properties, condos/co-ops and townhouses fell 5%, 3.3% and 1.9% respectively.

Investors have also gained market share in the single-family segment with 16.4% of U.S. single-family homes that sold in the first quarter going to investors, up from 15.2% a year earlier. The share of condos/co-ops bought by investors also ticked up slightly to 17.2%. The share of multifamily properties fell slightly to 30.7% and the share of townhouses was unchanged at 15.1%.