Redfin reports that investor purchases of U.S. homes dropped 29.7% year-over-year in Q3, as investors nationwide purchased 48,667 homes—the lowest level of any Q3 since 2016. By comparison, overall home purchases fell 22.2% to 305,219—the lowest third-quarter level since 2012.
The seven metros where investor purchases declined fastest were are all reported in the Sun Belt, including:
- Atlanta at -49.7%
- Charlotte, North Carolina at -49.6%
- Jacksonville, Florida at -48.2%
- Phoenix, Arizona at -47.4%
- Las Vegas at -43.3%
- Orlando, Florida at -42.6%
- Tampa, Florida at -41.3%
This is according to a Redfin analysis of county records across 39 of the most populous U.S. metropolitan areas. The national figures in the report represent an aggregation of those metros.
“Investors are very quiet in Phoenix,” said Redfin Premier Real Estate Agent Heather Mahmood-Corley. “If I get any investor clients these days, it’s usually the mom-and-pop ones. The bigger investors who used to come in and buy five or 10 homes at a time—you just don’t see that anymore. The money they were getting from hedge funds has dried up, rents are down and demand for housing in general has slowed because so many people are staying put.”
Redfin found that investors piled into the Sun Belt during the pandemic to profit off of surging housing and rental values as scores of remote workers moved in. Because investor purchases in the region jumped so dramatically, they now have relatively more room to fall. Appetite for homes in many Sun Belt metros has also cooled because so many buyers have been priced out.
Investors purchased $36 billion worth of U.S. homes in Q3, down 19.5% from a year earlier. The typical home purchased by investors cost $475,115, up slightly from $449,895 a year earlier, as overall home prices have ticked up.
Home purchases by both investors and individual buyers have plunged from pandemic heights due to elevated mortgage rate bordering the 8% mark, and home prices have cut into buying power, and house hunters don’t have enough homes to choose from. The typical homebuyer’s monthly payment is now more than $2,700, up roughly 11% from a year ago, as mortgage rates remain elevated. While 71% of investor purchases were made in cash in the third quarter, investors are still impacted by high interest rates because they often use other types of loans to cover expenses.
Investors have retreated faster than regular buyers partly because many of them buy homes purely to make money, which has become harder to do. Home prices are growing, but at a far slower pace than they were during the pandemic homebuying boom, and many sellers are being forced to cut their list prices after putting their homes on the market due to sluggish demand. That’s making it less attractive to be in the business of home flipping. Investors who buy homes to generate rental income are backing off, too, because rents have stopped growing and rental vacancies are on the rise.
“We don't expect investors to dive back into the market in a big way anytime soon,” said Redfin Senior Economist Sheharyar Bokhari. “Borrowing costs are unlikely to fall significantly in the near future, and while home prices may soften a bit, they probably won’t cool enough to bring back a critical mass of investors."
Investors purchased 15.9% of U.S. homes that sold in Q3, down slightly from 17.6% a year earlier, but higher than pre-pandemic levels.
Investors listed 16.4% fewer homes in September than they did a year earlier. But the typical home sold by an investor went for $179,116 (61.2%) more than they originally bought it for. That’s up from $144,379 (44.6%) a year earlier. September is the most recent month for which this data is available.
Overall, investors owned 8.2% of new listings in September, comparable with 8.8% a year earlier. Just 4.5% of homes sold by investors sold at a loss during the month, down from 13.8% a year earlier.
“The investors who bought up all the Airbnbs are selling—some are institutional investors and some are mom-and-pop investors who got in over their heads,” added Mahmood-Corley. “They’re selling because the Airbnb market isn’t as strong as it was during the pandemic, and in some areas, new rules on short-term rentals have made owning them less attractive. There are also just a lot of unknowns right now, so some people want to get rid of their investment properties so they don’t have to deal with the uncertainty.”
Click here for more on Redfin’s analysis of Q3 investor home purchases.