Real Estate Investor Home Purchases Declined 45% Year-Over-Year in Q2

Redfin reported on Wednesday (8-30-23) that investor home purchases declined 45% year-over-year in Q2, outpacing the 31% drop in overall homes sales during the same period. This marks the second largest decline since 2008, only trailing the 48% drop in Q1. The declines come as this year’s relatively cool housing and rental markets make investing in homes less attractive than it was during the pandemic-driven house buying frenzy of 2021 and early 2022.

Redfin notes that the drop in purchases has brought the total number of homes bought by investors below pre-pandemic levels. Real estate investors purchased approximately 50,000 homes in Q2—the fewest of any second quarter in seven years, with the exception of the start of the pandemic. The data in the report is from 39 of the most populous US metro areas, Redfin said.

In dollar terms, the drop in investor purchases is almost as large. Investors bought a total of $36.4 billion worth of homes in Q2, down 42% from 2022Q2. While that is still above pre-pandemic levels, it is getting closer: Investors bought a total of $34 billion worth of homes in 2018Q2 and a total of $31.9 billion in 2019Q2.

Adding additional background and his analysis to the report, Redfin Senior Chief Economist Sheharyar Bokhari said:

“Moving forward, the investors who do come back may be more focused on scooping up rental properties than flipping homes. All signs point to the rental market remaining relatively strong. Home prices and mortgage rates are high enough to motivate would-be first-time homebuyers to continue renting. The typical US asking rent remains quite high, just $16 shy of its all-time high, so investors who are landlords stand to earn money. Investor purchases of rental properties could be limited by some of them building new properties to rent out, though.

Home flippers may be slower to come back. That’s mainly because mortgage rates are unlikely to decline significantly in the short term, which will keep homebuying demand relatively low and discourage flippers. Plus, investors have lower-risk places to park their money right now than real estate, with high yields in the bond market.”