Housing price volatility appears to have led many
Home purchases made by real estate investors dropped 45.8% on an annual basis in the fourth quarter, the steepest decline since analysis of the data began in early 2000. Volumes slowed even further from third quarter's year-over-year pullback of 30.2% and represented a significant turnaround from late 2021 activity, when investor purchases increased by 43.9%.
Investors acquired 48,445 homes in the 40 metropolitan areas tracked by Redfin during the fourth quarter, down from 89,396 in the same period of 2021
On a quarterly basis, investor purchase plunged 27%, also a record outside of 2020's COVID-impacted numbers.
But the yearly falloff in investor interest mirrored overall buying trends. U.S. home purchases overall came in 40.8% below fourth-quarter volumes from one year earlier and 28.1% lower than the previous three months. And even with a dramatic reduction in purchases, investors still bought 18% of homes sold, down only one percentage point from 19% during the same period a year earlier.
Several factors drove down investment purchases. Higher interest rates meant borrowing money to invest in real estate became costlier, at the same time they
The sluggish housing environment has also led
For now, investors may be playing a waiting game.
"It's possible that investors will start to wade back into the market this year given that mortgage rates have ticked down from their 2022 high — especially if home prices show signs of bottoming," said Sheharyar Bokhari, Redfin senior economist, in a press release.
But volumes are unlikely to return to the heights seen in 2021, Bokhari said.
Widespread industry slowdowns affecting all mortgage lenders recently led to a major
The findings from Redfin run counter to sentiment compiled in a survey from last November conducted by real estate investment platform New Western. The company said a majority of solopreneurs and mom-and-pop
While business for such investors slowed, the impact has been less severe compared to larger institutional enterprises
"We're seeing better margins on the deals that they're picking up right now. It's a healthier market for them," he said.
Dollar volume produced from investor purchases came in at $31 billion in the fourth quarter, Redfin said, decreasing 42.7% from $54.1 billion a year earlier and 27.5% from $42.8 billion on a quarterly basis. The average price of properties bought equaled $425,926, similar to the value 12 months prior but 5.8% under the third-quarter number.
Investors were more likely to turn away from higher-priced properties in the fourth quarter. Purchases of mid-range properties dropped 58% annually, while high-priced homes decreased 53.2%. But the retreat from low-priced homes was more muted at 28.6%. Starter homes of 1,400 square feet or less made up 39.5% of investor purchases.
Mountain West cities which saw some of the largest influxes of new residents and subsequent investor interest in 2020 and 2021 are now experiencing the largest declines in purchases, Redfin researchers said. Las Vegas landed at the "top" of the list with a 67% drop-off, followed by Phoenix at 66.7%. Nassau County, New York, recorded a 63% decline, Atlanta purchases fell 62.8% and Charlotte, North Carolina followed at 61.9%.