According to Realtor.com, investor market share in homes nationwide remains high, as in December 2022 to close out Q4, investors purchased 8.2% of homes sold during the month, a total up 0.4 percentage points from the same time in 2021, but down from the February 2022 peak (8.9%).
Early in the pandemic-era boom, as housing demand skyrocketed and rents increased, larger investors edged out smaller investors, growing their share of investment purchases from 16.7% in July 2020 to a high of 31.8% in June 2022. Since then, the trend has shifted back towards smaller investors.
While investors are buying close to a historically high share of homes, net buying–the gap between their buying and selling of homes–was lower at the end of 2022 than at peak.
As reported by Realtor.com, in December of 2022, investors purchased 8.2% of the homes sold during the month, up 0.4 percentage points from the same time in 2021, setting the highest December share of investors on record.
Investor buyer share nationwide has lost some ground from the recent record high of 8.9% in February 2022, but remains above pre-pandemic levels. Early in the pandemic, investors pulled back more than other home buyers, and their share of sales plummeted to a low of 4.3% in April 2020. Since that time, the share of investor purchased homes rose with few interruptions through the February 2022 peak. The share of investor purchases remained high (8.5%+) from January through June 2022 before falling as the economic outlook became more uncertain and fears of a possible recession loomed. However, the share climbed again from October to December 2022, reaching back up to 8.2%. The high share in the first half of 2022 was driven both by growth in investor purchase counts and a pullback from non-investor buyers, who purchased 16.6% fewer homes in 2022 compared to a year earlier, while investor purchases grew 6.4%. The yearly share growth has not yet declined, with investor buyer share still up 0.4 percentage points year-over-year in December 2022.
And like the overall home purchase market, investor activity has followed suit, on a similar up and down trajectory.
After dropping in 2020 as a result of COVID-19 uncertainty and disruptions, investor home purchases grew 52.9% in 2021 more than making up for the pandemic interruption. Realtor.com found that purchases were up by 34.9% compared to 2019. Although overall home sales began to soften in Fall 2021, the number of investor purchases remained steadily higher than the previous year through May 2022 when growth rates began to shrink. In September 2022 there were fewer investor buyers than the prior year for the first time since the onset of the pandemic in April-June 2020. The count of investor purchases continued to slow, tumbling to 35.4% fewer year-over-year in December 2022.
Redfin recently found that mortgage-rate locks for second homes and investment properties were down 52% from pre-pandemic levels on a seasonally adjusted basis in March 2023–compared to a 13% decline for primary homes. Second-home rate locks fell to their lowest level since 2016 in February, and remained nearly as low in March. Redfin found that mortgage-rate locks for second homes reached a peak of 89% above pre-pandemic levels in August of 2020, a time when many affluent Americans bought homes in vacation destinations, encouraged by low mortgage rates, and remote work opportunities.
“With housing payments near their all-time high; a lot of people can’t afford to buy one home right now, let alone a second,” noted Redfin Deputy Chief Economist Taylor Marr. “Add the recent increase in loan fees, inflation, shaky financial markets, the end of pandemic-related financial stimulus and many companies calling workers back to the office, and it’s simply a challenging time for most Americans to buy a vacation home.”
Regionally in 2022, Southern U.S. metros experienced the greatest share of and growth in investor activity, followed by the Midwest. The top 10 metros which saw the greatest increase in the investor share of the market include:
- Memphis, Tennessee (+7.5 percentage points)
- Honolulu, Hawaii (+5.8 ppts)
- Cape Coral, Florida (5.2 ppts)
- Palm Bay, Florida (4.2 ppts)
- San Antonio, Texas (+4.1 ppts)
Six of the top 10 metros with the greatest increase in the investor share of purchases over the past year are relatively affordable metros located in the South. Seven of the top 10 investor growth markets had March 2023 median listing prices below the national median. The March 2023 listing price in the top 10 metros where investors have a growing share of the market was $413,500, on average, compared to the national median listing price of $424,000.
Non-investor sales started to fall off sooner and generally exceeded the rate of investor purchase declines through the end of 2022, which helped keep the share of investor purchased homes high. Of note, year-over-year declines in investor purchases did not begin until September 2022, while non-investor purchases started falling consistently compared to the previous year in March 2022. Across the full year, investor purchases increased by 6.4% year-over-year in 2022, while non-investor purchases fell 16.6%. Investor purchases surged in 2021 and into 2022, so compared to pre-pandemic (2019), sales by investors climbed 14.3% by 2022.
Among all investors in 2021, the share purchasing homes in cash grew to 72.3%, higher than in 2016-2020, but lower than the 2009-2015 average. As home sales remained high in anticipation of the Fed’s tightening and higher mortgage rates in late 2021, the share of investor cash purchases hit the highest level in seven years in November at 73.9%. In 2022, as home sales sank and inventory began to pile up, the share fell back to an average 68.9%. Looking at monthly data, the share reached as low as 66.7% by December, the lowest share of cash investor purchases since May 2008.
Click here to read more on Realtor.com’s report on investor home sales.