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Investor Home Purchases Drop 30% in 3Q

Given home prices and mortgage rates, hordes of RE investors likely won’t be back soon – but fewer first-time buyers also won’t be losing homes to all-cash offers.

SEATTLE – U.S. investor home purchases fell 30.2% year-over-year in the third quarter (3Q) – the largest decline since the Great Recession aside from 2Q 2020 when the nation faced lockdowns due to the COVID-19 pandemic, according to a report from Redfin. Overall, total home purchases dropped 27.4% in 3Q.

Quarter-to-quarter, investor purchases slumped 26.1%, the largest quarterly decline on record with the exception of the start of the pandemic. Total home purchases were down a relatively lower 17.4%.

As a share of all homebuyers, investor numbers dropped two quarters in a row. They bought roughly 65,000 homes in the metros tracked by Redfin in the third quarter, or 17.5% of all homes purchased. That’s down from 19.5% in the second quarter and 18.2% one year earlier, though it’s still up slightly from roughly 15% before the pandemic.

The typical home investors bought cost $451,975, up 6.4% from one year earlier but down 4.3% from one quarter earlier.

“It’s unlikely that investors will return to the market in a big way anytime soon,” says Redfin Senior Economist Sheharyar Bokhari. “Home prices would need to fall significantly for that to happen.”

However, there’s a silver lining for homebuyers, and notably first-time homebuyers: “This means that regular buyers who are still in the market are no longer facing fierce competition from hordes of cash-rich investors like they were last year,” says Bokhari.

Florida investors remain active

The study found 3Q investors had the highest market share in Jacksonville, where they bought 29.6% of homes purchased, followed by Miami (28.9%). Orlando ranked No. 5 at 26%, with Atlanta (27.6%) third and Las Vegas (26.9%) fourth.

While investor market share is highest in Jacksonville, investors still bought 31.9% fewer properties than they did one year earlier, and a number of investors want to offload properties.

“Almost all of my listings right now are people looking to sell investment properties or second homes,” says local Redfin agent Heather Kruayai. “They want to get rid of them now while they still have some value because they’re scared there’s going to be another big crash.”

Even though Miami ranked high for investors, , it also ranked in the top 10 for the “largest decline in investor purchases.”

“The housing markets that investors are backing out of fastest are those that rose rapidly during the pandemic and are now falling rapidly,” Bokhari says. “That volatility creates a lot of uncertainty, which raises the risk of investors losing money.”

Metros With Largest Declines in Investor Purchases in Q3

  1. Phoenix: 49.5% year-over-year investor decline
  2. Portland, Oregon: Down 47.4%
  3. Las Vegas: Down 47.4%
  4. Sacramento: Down 43.2%
  5. Atlanta: Down 42.2%
  6. Charlotte, North Carolina: Down 41.7%
  7. Miami: Down 37.7%
  8. San Diego: Down 34.5%
  9. Riverside, California: Down 33.8%

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Source: https://www.floridarealtors.org/news-media/news-articles/2022/11/investor-home-purchases-drop-30-3q

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