Real estate investors bought 16% of homes in the third quarter of 2024
Like the US housing market decreased in the third quarter due to an increase house prices and higher mortgage rates also reduced investor purchases, according to a new report from Redfin.
The Seattle-based brokerage found that real estate investor purchases fell 2.3% year over year in the third quarter of 2024, marking a small change after four years of fluctuations.
The report is based on an analysis of home purchase data from 39 of the most populous metropolitan areas since 2000. According to Redfin, an investor is “any institution or company that purchases residential real estate,” which includes both institutional and mother-and-pop investors. .
Investors purchased $38.8 billion worth of properties in the third quarter of 2024, an increase of 3.4% from a year earlier and in line with the increase in house prices.
“Investors are finding balance after several years of whiplash: They bought homes at a frenzied pace in 2021 and early 2022, then quickly retreated as the housing market slowed as mortgage rates rose,” said Sheharyar Bokhari, Redfin senior economist. a statement.
“Now there is a middle ground. Buying homes to convert or rent out is less attractive than at the start of the pandemic, when demand from both homebuyers and renters was high. But it is more attractive than last year, when rising house prices and borrowing costs put a major damper on demand.”
Redfin highlighted that investors purchased 15.9% of all homes sold in the third quarter of 2024, down from 16.2% a year earlier and the lowest share since late 2020. The highest recorded share of homes purchased by investors was 20.9% in the first quarter of 2022, when investors benefited from low mortgage rates.
Investors struggled to buy and resell homes at a profit, which Redfin attributed to rising home prices and mortgage rates. In October, the typical sales price for an investor-owned home was 55% — or $181,567 — more than what most investors paid. That was less than the 64% gain a year earlier. But Redfin noted that “interest rates are lower than a year ago and housing demand has improved somewhat in recent months.”
Low-priced homes – homes priced in the bottom third of their local market – represented 45.7% of investor purchases. High-priced and mid-priced homes accounted for shares of 30.4% and 23.9% respectively. Redfin noted that investors prefer low-priced homes due to low acquisition costs and larger pools of potential buyers or renters.
Miami (28.2%); Anaheim, California (24.3%); and San Diego (23.3%) had the largest share of home purchases by investors of any metropolitan area analyzed. Las Vegas (22.9%), San Francisco (21.4%) and Los Angeles (20.9%) followed.
Detroit had the largest return on investment (ROI), with the average investor selling a home for 135% – or $121,500 – more than the initial purchase price of $90,000. Philadelphia (109%) and Newark, New Jersey (106%) followed closely.
Redfin notes that more than half of the metros analyzed experienced a decline in year-over-year ROI, led by Washington, DC, Phoenix and Oakland, California.
Miami experienced a 19.4% year-over-year decline in investor purchases, despite having the largest investor share of any city. Investor purchases also fell 23.8% in neighboring Fort Lauderdale, indicating growing concern about Florida’s housing market.
“Investors are refraining from purchasing homes in Florida for similar reasons as individuals are retreating: Florida has become a less desirable place to live as the intensity and frequency of natural disasters increases. Additionally, home insurance and HOA costs are skyrocketing,” Redfin said.
