Investor housing purchases rise for first time since 2022

Investment in the housing market is on the rise again.

Investors purchased approximately 44,000 homes in the United States in the first quarter, according to a report from Redfin. That was only a 0.5 percent increase year-over-year, but represented the first rise in activity by investors since 2022’s second quarter.

Investors also claimed a larger share of transactions. They accounted for 18.7 percent of home sales in the country in the first quarter, the highest share in nearly two years.

Investor transactions surged in the early days of the pandemic, but as interest rates and mortgage rates surged, investors retreated from their spree as borrowing costs and a stabilizing single-family rental market hindered profits.

But the investments could be paying off. In March, the typical investor home sale came at a 55.2 percent premium compared to the purchase price, up from 46.3 percent in March 2023. Only 5.3 percent of investor sales came at a loss in March. The rising cost of improvements, which are passed along to individual homebuyers, may help explain the increase.

Investors have been particularly active in hunting affordable, single-family homes. Purchases of single-family homes increased 3.9 percent annually in the first quarter, while townhouse, condo/co-op and multifamily sales all decreased. Single-family homes made up 68.9 percent of first-quarter investor purchases.

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In terms of affordability, investors bought a record 26.1 percent of low-priced homes that sold in the first quarter, versus 16.4 percent of high-priced homes and 13.4 percent of mid-priced homes. Politicians have seized on such trends as a rationale to limit investors’ purchases of homes, but many of the transactions might be examples of fixer-uppers being upgraded.

California was home to four of the five metros with the largest increase in investor purchases year-over-year, led by a 27.8 percent gain in San Jose. On the other side of the ledger, Cincinnati saw the biggest decline, as investor purchases fell 22.1 percent year-over-year.

Investors accounted for the largest sale of purchases in Miami in the first quarter, where they had a hand in 30.6 percent of the market’s buys.