SEATTLE, WA — Investor activity in the U.S. housing market is on the rise, according to a new report from Redfin, the technology-driven real estate brokerage. Investor purchases of homes increased by 3.4% year-over-year in the second quarter, marking the largest uptick since Q2 2022. This resurgence translated to $43 billion worth of homes, up 13.7% from the same period last year.
The housing market has experienced a period of stabilization following years of volatility. Investor home purchases surged during the pandemic boom in 2021 but then plummeted nearly 50% last year, as falling rents and home values impacted potential profits. However, the current rise signifies a shift towards more stable investor activity.
“One reason real estate investors are coming out of hibernation is to take advantage of robust demand from renters,” said Redfin Senior Economist Sheharyar Bokhari. “Elevated home prices and mortgage rates have pushed homeownership out of reach for a lot of Americans, which is fueling demand for rentals. Investors, many of whom can afford to pay in cash to avoid the sting of high mortgage rates, are cashing in on that demand.”
Despite the positive trend in investor purchases, pending home sales across the U.S. fell by 1.9% in Q2, as high mortgage rates and home prices deterred individual buyers. Investors, who often pay in cash, are less affected by mortgage rate fluctuations compared to regular buyers. In June, the typical home sold by an investor fetched 58% more than its purchase price, although this margin has slightly decreased from 62.1% a year earlier.
Regionally, San Jose, CA, and Las Vegas, NV, saw the highest increases in investor home purchases, with both markets experiencing a 27% rise year-over-year. The San Francisco Bay Area also showed strong gains, with San Francisco itself seeing a 15.2% increase in overall home purchases. “San Jose has a lot of overseas investors buying sight-unseen, and a lot of home flippers who are purchasing dilapidated homes, putting some lipstick on them, and selling them for a profit,” noted Craig Pellegrini, a Redfin Premier real estate agent in San Jose.
On the other hand, investor purchases in Fort Lauderdale, FL, fell by 15.9%, the fastest decline among the metros analyzed. “Even though rents are high here, the insurance rates and property taxes are also high, making it difficult for the numbers to make sense for investors,” said Bob Benson, a Redfin Premier real estate agent in Fort Lauderdale.
Investor purchases of single-family homes rose by 6.7% year-over-year in Q2, marking the largest increase in two years. Single-family homes made up 69.4% of investor purchases in this period, the highest since mid-2022. Conversely, purchases of multifamily properties, condos, and townhouses declined.
Investors have been particularly active in the market for low-priced homes, buying 24.1% of such properties sold in Q2, up from 22.7% a year earlier. In contrast, they purchased 14.7% of high-priced homes and 12.1% of mid-priced homes.
Overall, investor activity is inching back towards pre-pandemic levels, driven by strong rental demand and the ability to navigate high mortgage rates. As the market continues to adapt, both individual buyers and investors will need to strategically navigate the evolving landscape.
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