The real estate investment landscape is undergoing a significant shift, with investors scaling back their activities and purchasing 45% fewer homes compared to the previous year. This decline in investor purchases has outpaced the overall home sales drop, which stands at 31%.
Investor market share has dwindled to 16%, a noticeable decrease from its peak of 20% recorded in the first quarter of 2022. Furthermore, investors now constitute a smaller portion of the home-selling market, with only 8% of new listings owned by investors, down from a high of 13% observed at the close of 2021.
Investors are displaying a preference for lower-priced homes and single-family properties, although purchases of single-family homes have declined due to limited inventory availability. Notably, the drop in investor activity has been most pronounced in Sun Belt metros like Phoenix and Las Vegas, which experienced a housing boom during the pandemic and consequently have more room for a decline.
The second quarter of this year witnessed a 45% year-over-year decrease in investor home purchases, marking the most substantial decline since 2008, with the exception of the preceding quarter when purchases dropped by 48%. This trend is emerging as the housing and rental markets in 2023 appear less appealing for investment compared to the frenzy witnessed during the homebuying surge of 2021 and early 2022.
These findings are derived from a comprehensive Redfin analysis of county records encompassing 39 of the most populous metropolitan areas in the United States. Investors, in this context, are defined as institutions or businesses involved in the acquisition of residential real estate. The data presented is subject to potential revisions, and additional methodology details are available at the conclusion of this report.
The decline in investor purchases has now pushed the total number of homes acquired by investors below pre-pandemic levels. In the second quarter, real estate investors purchased approximately 50,000 homes in the United States, marking the lowest figure for a second quarter in seven years, except for the initial phase of the pandemic. It’s worth noting that this data exhibits a seasonal pattern, with investor purchases typically reaching lows in the first quarter and peaking in the second quarter.