$43 billion worth of homes have reportedly been snapped up by investors this year
Investor activity in the US housing market surged by 3.4% in the second quarter of 2024, marking the most significant increase since the same period in 2022, according to a report by Redfin, a technology-driven real estate brokerage. Investors acquired $43 billion worth of homes, up 13.7% from the previous year.
In the second quarter of 2024, investors bought 16.8% of US homes that sold, an increase from 16% a year earlier but down from a peak of 20.8% during the pandemic. The rise in investor purchases comes as homeownership remains out of reach for many Americans due to high home prices and mortgage rates. These factors have led to a growing demand for rental properties, which investors are capitalizing on, often with cash transactions to avoid high mortgage costs.
Sheharyar Bokhari, a senior economist at Redfin, noted, “Elevated home prices and mortgage rates have pushed homeownership out of reach for a lot of Americans, which is fueling demand for rentals. Investors, many of whom can afford to pay in cash to avoid the sting of high mortgage rates, are cashing in on that demand.”
Mortgage rates impacting homebuying plans
Despite a recent drop in mortgage rates, homeownership challenges persist. The lower rates, resulting from a weaker-than-expected jobs report and subsequent recession fears, have improved purchasing power but have not fully addressed the affordability issue. Rents have been slow to rise due to a glut of new apartment construction, but this is expected to change as apartment building slows, potentially leading to higher rents and further investment appeal, Redfin noted.
Investor activity appears to be stabilizing after fluctuating significantly in recent years. The market saw a dramatic increase in investor purchases during the pandemic but experienced a nearly 50% drop last year as declining rents and home values diminished potential returns. Now, investor purchases are nearing pre-pandemic levels.
Investor interest has been particularly strong in single-family homes, which saw a 6.7% year-over-year increase in purchases by investors. This segment represents 69.4% of investor acquisitions, the highest since mid-2022. Conversely, investment in multifamily properties, condos, and townhouses has declined.
Among the metros analyzed, San Jose and Las Vegas saw the most substantial year-over-year increases in investor home purchases, up 27% each. San Francisco and Sacramento also reported notable gains. In contrast, Fort Lauderdale and several other cities experienced declines in investor activity.
In San Francisco, the median capital gain for investor-purchased homes surged 50.7% from the previous year, highlighting significant returns on investment in the Bay Area. San Jose similarly saw a 48.3% increase in median gains.
Redfin Premier real estate agent Craig Pellegrini in San Jose observed a diverse investor base, including both institutional and individual buyers. He noted a trend of international investors and home flippers contributing to the city’s vibrant investment landscape.
The report highlighted that about 24.1% of low-priced homes sold in the second quarter were purchased by investors, up from 22.7% a year earlier. Investors are increasingly focusing on affordable housing segments as they continue to navigate the complexities of the current real estate market.
Have something to say about this story? Let us know in the comments below.
