Approximately 13.5% of homes offloaded by investors in March sold for less than what they originally paid, researchers at the online real estate brokerage said. While the number represents a decrease from 14.5% reported in February, recent levels are the highest since 2016 and nearly three times above the share a year earlier. In May 2022, investors lost money on a record-low 2.8% of sales by comparison.
Likewise, average profits for investment properties sold contracted in March on an annual basis to $145,714, but still equal to a 45.9% gain. The margin was also down from 55.3%, or $173,458, 12 months earlier.
"You might wonder why investors don't just wait to sell until the housing market bounces back. Many long-term investors who rent their properties out are doing that, but many flippers — especially those who bought recently — can't afford to," said Sheharyar Bokhari, Redfin senior economist, in a press release.
An even larger share — 20.8% — of home flippers, who Redfin defines as investors that buy and resell a property within nine months, took a loss on transactions. Meanwhile, across the entire housing market, only 4.8% of properties were sold for less than original purchase in March.
Many short-term investors are opting to sell in order to cut their losses, with concerns about potential declines in prices in an uncertain housing market, Bokhari added.
"Holding onto homes that aren't producing income can be expensive because the owner is on the hook for property taxes, along with operating costs and monthly mortgage payments in some cases," Bokhari said.
The March data shows the stress macro housing trends might be causing for real estate investors. While a decline in the number of homes for sale is currently causing little movement in home prices, higher mortgage rates are
The change in market conditions has led investors to
Profits reported also only measure differences in value between purchase and resale prices, meaning actual returns on investment are even lower when renovations are factored in.
A suspension of iBuyer activity, including exits from the channel
Topping the list was Phoenix, where 30.7% of properties failed to deliver profits on the original investment, followed by Las Vegas at 28%. Jacksonville, Florida; Sacramento, California; and Charlotte, North Carolina, came in next at 20.9%, 20.2% and 17.4%, respectively.
Even investors holding on to their recent purchases for use as rentals are seeing limits to potential revenue, Redfin said. Median asking rent slipped 0.4% in March, the first annual decline in three years, with several markets posting larger drops. Increased regulation of