LendingOne analyzed Redfin’s most recent quarterly data for investor purchases to better understand what investors are doing in the housing market right now.
LendingOne Topline Findings:
- In Q1 2024, the total number of U.S. homes purchased by investors was 47.3% below the levels reached at the height of the Pandemic Housing Boom in Q1 2022.
- In Q1 2024, the total number of U.S. homes purchased by investors was 0.5% above what investors purchased in Q1 2023.
In 2021, investors took advantage of the Pandemic Housing Boom's favorable buying conditions. Historically low interest rates, stimulus policies, and the shift to remote work boosted investor purchases of homes across the U.S. In metros like Sacramento, Jacksonville, and Atlanta, investor home purchases more than doubled from pre-pandemic levels.
However, this frenzy fizzled out once the average 30-year fixed mortgage rate jumped above 6.0% in summer 2022. The higher rates meant that far fewer homes for sale could generate the returns that everyone from small landlords to larger institutions were seeking. This led to a significant slowdown in investor purchasing activity. Nationally, investor home purchases fell from 83,468 at the peak in Q1 2022 to 43,969 in Q1 2024—a 47% drop.
While total investor purchases are still well below levels seen during the frenzy, the deceleration has let up. Indeed, investors' purchases in Q1 2024 (43,969) were just a hair higher than the number of U.S. homes investors purchased in Q1 2023 (43,753). And some West Coast markets, where investors had pulled back sharply following the rate shock, have started to see some investors return to the market.
Investor trends vary a lot by market. Among the 40 major metros that Redfin tracks, 18 saw a drop in investor home purchases from Q1 2023 to Q1 2024, while 22 saw a jump.
These five metros saw the most investor home purchase growth year-over-year:
- San Jose (+28.0%)
- Oakland (+22.1%)
- Minneapolis (+21.7%)
- Sacramento (+20.2%)
- San Francisco (+18.6%)
These five metros saw the least investor home purchase growth year-over-year:
- Cincinnati (-22.1%),
- Baltimore (-22.0%)
- Providence (-20.2%),
- Virginia Beach (-15.1%)
- Chicago (-14.6%)
While California markets have seen year-over-year growth in investor purchases in the past year, they are still among the markets with the least total investor activity. The reason is that it’s still hard to find cash flow in high-cost markets on the West Coast.
Big picture: Recent data from Redfin reveals that investor activity in the housing market remains subdued due to high interest rates and elevated home prices relative to rents. This could change if mortgage rates fall or prices soften.
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