Investor homebuying has fallen by nearly 50%: report

Average American homebuyers have cause to rejoice: Recent findings show the amount of residential real estate supply being scooped up by corporations has dropped precipitously, meaning less competition for the common folk. 

Year-over-year, businesses bought 46% fewer homes in the fourth quarter of 2022 than they did in 2021, a new analysis by real estate brokerage Redfin reported. The recent decline set a new record, putting the subprime mortgage crisis of 2008 — during which time investor purchases slumped 45% — in second place for the largest fall since 2000. 

The shift was felt most significantly in pandemic boomtowns, with Las Vegas and Phoenix seeing the largest slip in investor investment — more than 60% — than any other metro area. Single-family homes and high-priced properties, Redfin found, also saw much steeper declines in investor interest than condos, townhomes and low-priced properties. 

Notably, investor market share has remained “fairly steady,” Redfin reported. The reason being that individual homebuyers are also purchasing less prolifically. 

As for the cause of investors’ lost interest, Redfin blames the current high cost of borrowing money — as the Fed raised interest rates to combat ongoing inflation — and the looming prospect of home values going down appreciably.

redfin investor market report
The record-breaking decline beats out 2008 for the steepest one ever recorded.
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redfin investor market report
Las Vegas is among the US metros seeing the largest decline in investor investment.
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redfin investor market report
Even if investor interest does bounce back, the market likely won’t reach the same level it was at in 2021 anytime soon, experts noted.
Bloomberg via Getty Images

“A lot of investors are on hold because they still see home prices declining,” said Florida-based Redfin agent Elena Fleck in the report. “The investors who are in the market are selective and aggressive. Many of them are only offering around [60%] of the asking price since it’s so difficult to make a profit when flipping homes right now.”

Other experts believe the shift — and brief competitive interlude for non-corporate plebeians — will prove fleeting. 

“It’s possible that investors will start to wade back into the market this year given that mortgage rates have ticked down from their 2022 high — especially if home prices show signs of bottoming,” Redfin Senior Economist Sheharyar Bokhari said. “But it’s unlikely that investors will return with the same vigor they had in 2021. That’s good news for individual buyers, who are still grappling with high housing costs but no longer losing bidding war after bidding war to investors.”

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