Home purchases by investors fell by almost 50%: report

The average homebuyer in America has reason to rejoice: Recent studies show that the number of residential properties bought by corporations has dropped dramatically, which means less competition for ordinary people.

Compared to last year, businesses bought 46% fewer homes in the fourth quarter of 2022 compared to 2021, according to a new analysis from real estate brokerage Redfin. The recent drop set a new record, putting the 2008 subprime mortgage crisis, when investor purchases fell 45%, the second-biggest drop since 2000.

The shift has been felt most tangibly in pandemic-booming cities, with Las Vegas and Phoenix seeing the biggest declines in investor investment—more than 60%—of any other metropolitan area. Redfin found that private homes and high-end real estate also saw a much sharper decline in investor interest than condominiums, townhouses, and cheap real estate.

Notably, investor share in the market has remained “fairly stable,” according to Redfin. The reason is that individual home buyers are also buying less.

As for the reason for the loss of investor interest, Redfin blames the current high cost of borrowing money – as the Fed has raised interest rates to combat ongoing inflation – and the looming prospect of a marked decline in home values.

“Many investors are holding back because they are still seeing house prices decline,” Florida-based Redfin agent Elena Fleck said in the report. “Investors in the market are selective and aggressive. Many of them offer only approx. [60%] off the asking price since it’s so hard to make a profit by flipping houses these days.”

Other experts believe that this shift – and a brief competitive respite for the unincorporated plebeians – will prove fleeting.

“It is possible that investors will start to return to the market this year, given that mortgage rates have declined from the high of 2022, especially if housing prices show signs of a bottom,” said Sheharyar Bokhari, senior economist at Redfin. “But it is unlikely that investors will return with the same energy as in 2021. This is good news for individual buyers who are still struggling with high home values ​​but are no longer losing a bidding war after a bidding war to investors.”