Investors are exiting the U.S. housing market faster than individual buyers. In the second quarter, investors bought 16.8% of U.S. homes, the highest share ever recorded in a second quarter except for 2022. While that’s down from the all-time high of 20.8% reached during the pandemic, it’s up from 16% a year ago, according to Redfin.
While investor home purchases rose 3.4 percent in the second quarter, overall U.S. home purchases fell 1.9 percent as increased mortgage rates and prices deterred buyers, the company said. In general, investors are less sensitive to fluctuations in mortgage rates than regular buyers because most pay cash. However, they are exposed to interest rate fluctuations on loans they take out to cover flipping and other expenses.
Investors purchased $43 billion worth of homes in the second quarter, also a two-year high. According to Redfin, this trend represents a market stabilization after several years of dramatic ups and downs, including double-digit increases in investor home purchases during the pandemic, followed by a nearly 50% plunge last year.
“One reason real estate investors are emerging from hibernation is that they want to capitalize on strong demand from renters,” said Sheharyar Bokhari, senior economist at Redfin. “Higher home prices and mortgage rates have made home ownership unaffordable for many Americans, fueling demand for rental housing. Investors, many of whom can afford to pay cash to avoid high mortgage rates, are capitalizing on this demand.”
According to Redfin, owning a home remains out of reach for many Americans, even as purchasing power increases due to lower mortgage rates this year. However, while renter demand is strong, rents are sluggish as a wave of new housing hits the market following the pandemic-era construction boom. With housing construction slowing, rents could soon start to pick up again, the company said.
According to Redfin, single-family home purchases are driving the increase in investor activity. Investor purchases of single-family homes rose 6.7% year over year in the second quarter, the largest increase in two years. Investor purchases of multifamily homes, condos/co-ops and townhomes, however, fell 5%, 3.3% and 1.9%, respectively.
Investors were also able to gain market share in the single-family home segment: 16.4% of US single-family homes sold in the first quarter went to investors, compared to 15.2% in the previous year. The share of condominiums/cooperatives purchased by investors also rose slightly to 17.2%. The share of multi-family homes fell slightly to 30.7% and the share of townhouses remained unchanged at 15.1%.
