Real estate investment will slow, but small buyers boost market

A slowdown in real estate investment purchases over the past year looks unlikely to turn around in 2025, but smaller businesses will help maintain activity, according to new research from Corelogic.  

Housing forecasts show continued obstacles ahead for the real estate investment community. After starting the year with a nearly 30% share of the housing market in January, the investor share of purchases dropped to 23% by June before rising in the third quarter to 25% by the end of September. The September share shrank from approximately 28% one year earlier, according to Corelogic's data.  

While some of the pullback follows traditional seasonal patterns, "all signs point to investor share remaining around 25% of total sales for the foreseeable future as mortgage rates and home prices remain high," said Corelogic economist Thomas Malone.

Approaching summer, investor activity typically decreases but picks up again in the fall and winter. September's muted activity compared to the prior two years suggests near-term sluggishness, though. 

"It's not just the share of investors that is shrinking. The number of purchases that they are making is also less," Malone wrote in a research post. 

In the third quarter, average monthly investor purchase volume declined to 85,000 compared to 106,000 over the same three months in 2023. The pullback was even more pronounced from the third quarters of 2022 and 2021 when average purchases came in at 120,000 and 140,000. 

The challenging conditions laid out in recent rate and housing price forecasts, as well as potential inflationary pressures, may be making property investment less attractive, Malone said. 

"Faced with these headwinds, it is not clear what may draw investors back into the market at previous levels," he said.

Corelogic's research corresponds to findings of similar 2024 investor patterns from Redfin, with the latter company suggesting late year trends point to "balance" returning to the market after more volatile swings post pandemic. 

Similarly, in a fourth quarter report looking at home flipping investors specifically, real estate data provider Attom said the latest economic trends may throw cold water on buyer interest and impede future growth.

"As interest rates remain double what they were a few years ago and inflation keeps raising renovation costs, investors continue to have a tough time making the kind of profits that would lure more into the game," Attom CEO Rob Barber said.

While the public spotlight on real estate investments often lands on institutional buyers, smaller mom-and-pop businesses account for 60% of the purchases, according to Corelogic's report. Among the 20 largest markets, the share of purchases made by the largest investors owning more than 1,000 properties never exceeded 5%.  

Activity from investors propped up demand in a slowing housing market in some areas, helping to keep prices from declining, but their influence might be less significant than the public perceives, though, Malone said. 

"Historical trends from mid-2022 to early 2024 show no consistent correlation between investor share and price movements, cautioning against oversimplified narratives about their market impact." 

The pullback in investor purchase activity was widespread, but Oregon, the District of Columbia and South Dakota were exceptions with their year-over-year shares increasing by 0.2%, 0.49% and 3.39%, respectively.

On the other end, Alaska, Idaho and Maryland recorded the biggest falls in investor-purchase shares with drops of 6.9%, 5.7% and 5.5%. Several other states saw declines greater than 4%.