How Home Investor Trends Are Weathering High Rates

According to a new report from Redfin, investor home purchases fell 45% year-over-year during the second quarter of 2023, which outpaced the general 31% drop in overall home sales during the same period. 

This represents the biggest decline in investor activity since 2008, with the exception of the first quarter of 2023 when investor activity fell 48%. The decline comes as this year’s relatively cool housing and rental markets makes investing in homes less attractive than it was during the pandemic-driven homebuying frenzy of 2021 and early 2022. 

According to Redfin, the drop in purchases has brought the total number of homes to pre-pandemic levels; investors bought about 50,000 homes during the second quarter, the fewest of any second quarter in seven years which tracks this metric across the top-39 metropolitan areas. 

Furthermore, this marks a retreat from a boom in investor activity during the pandemic, which was driven by record-low mortgage rates and huge homebuying and rental demand, creating opportunities for investors to make a lot of money, quickly. 

“Offers from hedge funds have dried up; I haven’t received an offer from one in a long time, except unrealistically low offers,” said Las Vegas Redfin Premier agent Shay Stein. “From mid-2020 until early 2022 when interest rates started going up, hedge funds bought up a ton of properties and immediately turned them into rentals, pricing out local buyers. Now a big portion of our homes are owned by investors, but they’re not adding to their portfolios.” 

Redfin also reported that drop in investor activity in dollars is just as big as their activity: investors bought a total of $36.4 billion worth of homes in the second quarter, down 42% from a year earlier. That’s still above pre-pandemic levels, but dropping closer to it: Investors bought a total of $34 billion in the second quarter of 2018, and a total of $31.9 billion in the second quarter of 2019. 

In terms of market share, investors bought 15.6% of homes that were sold in the U.S. during the second quarter, down from 19.7% a year earlier and a record high of 20.4% in the beginning of 2022. 

Click here to see the report in its entirety.