The housing market pie is getting smaller, but investors are carving out a bigger slice than ever.
Investors accounted for 20 percent of all first quarter home purchases in 40 of the country’s major markets, according to a report from Redfin. That is a record for the sector, which was 19.2 percent in the fourth quarter and 15.3 percent a year ago. (The data has been collected since 2000.)
With prices high and inventory low, investors purchased fewer homes than in the previous quarter, but the drop was even greater for traditional buyers. Investors bought 78,000 homes in the first quarter, down 11.5 percent from the previous quarter and 16.5 percent from its peak in 2021’s third quarter.
Overall, investors poured $49.8 billion into home purchases in the first quarter, $3.6 billion shy of what they spent in the fourth quarter.
“Investor home purchases are falling for the same reason overall home purchases are falling: Surging interest rates and high housing prices have made it more expensive to get a mortgage and buy a home,” said Redfin senior economist Sheharyar Bokhari.
The increased market share shows that investors continue to compete with traditional homebuyers, many of whom are being priced out by rising mortgage rates but who also come to the table with a different set of motivations.
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While investors increased their market share, they also shifted their tactics to battle market headwinds.
Investor purchases of high- and mid-priced homes dropped sharply from the fourth quarter, but increased 8.3 percent for low-priced homes, which have greater profit potential.
Low-priced homes accounted for 44.9 percent of investment purchases, and high-priced homes for 24.8 percent.
Investors also seem to be retreating from single-family homes, which had been a major focus of theirs since the start of the pandemic. Single-family home purchases by investors dropped 14.4 percent from the previous quarter; townhouse purchases increased 1.5 percent.
But single-family homes remain the dominant play for investors. Despite the decrease, 73 percent of investor purchases in the first quarter were for single-family homes.
Among the top 10 markets by investor share, none saw an increase in total investor purchases from the previous quarter. The biggest jump in total investor purchases came in Philadelphia, up 55 percent.
Atlanta had the largest market share of investor purchases among the 40 major markets: Investors accounted for 33 percent of first-quarter purchases. Investors accounted for 28 percent of purchases in Miami, ranking it in the top five.