Investors bought record share of homes as mortgage costs climbed

Investors played a bigger role in the U.S. housing market in the first quarter, as landlords and home flippers proved less sensitive to rising costs than ordinary buyers.

Investors bought 20% of homes in metropolitan areas tracked by Redfin Corp. during the first three months of 2022, according to a report Wednesday. That was the highest share since 2000, the earliest year included in the brokerage’s data.

Property investors have accounted for a greater share of deals in recent years, as demographic trends combined with new remote-working options as a result of the pandemic fueled unprecedented demand for residential real estate.

Investor purchases declined in the first quarter, as higher home prices and borrowing costs gave pause to some commercial players. But affordability challenges had a bigger impact on households. 

Investors purchased nearly 78,000 homes in the first quarter, according to Redfin, down from an all-time high of roughly 93,000 in the third quarter of 2021. Purchases by that group declined nearly 12% from the fourth quarter, a smaller slump than the 15% drop among all buyers, according to Redfin, which included single-family houses, condos and apartment buildings in its data.

“Right now, those who can afford to buy are going to face less competition,” said Sheharyar Bokhari, an economist at Redfin. “They still have to compete with investors. The investor share has gone up, which means regular homebuyers were squeezed more.”

The Redfin report doesn’t distinguish between investors based on size, or whether they purchased a property to flip it, rent it out, or for some other purchase. The data show investors pulled back on acquisitions of high- and medium-priced properties in the first quarter compared to the fourth, while increasing their appetite for lower-cost homes.

Investors targeted Sun Belt metro areas during the period, with Atlanta; Jacksonville, Florida; and Charlotte, North Carolina, topping Redfin’s list of markets with the highest share of purchases by those buyers. It’s too soon to tell whether sharper rate hikes in the second quarter would have a greater impact on investors or households, Redfin’s Bokhari said.