Fewer flips and steady rentals mark the path to a balanced housing market
Investor participation in the US housing market is settling into a new rhythm, showing signs of stability after dramatic swings during the pandemic. Real estate investors purchased 2.3% fewer homes in the third quarter of 2024 compared to the same period last year, according to Redfin’s latest data.
Investors bought 49,380 homes in the third quarter, a figure consistent with pre-pandemic averages of around 50,000 purchases per quarter. By contrast, during the peak of 2021’s housing boom, quarterly purchases neared 100,000. While the number of homes purchased dipped, the total dollar value of these transactions increased by 3.4% year-over-year to $38.8 billion, keeping pace with rising home prices.
“Investors are finding a balance after several years of whiplash: They bought up homes at a frenzied pace in 2021 and the beginning of 2022, then quickly backed off when the housing market slowed as mortgage rates rose,” said Redfin senior economist Sheharyar Bokhari.
“Now there’s a middle ground.”
Several factors have tempered investor activity, particularly in markets that saw explosive growth during the pandemic.
The average profit margin on homes flipped by investors declined to 55% in October, down from 64% a year ago. Despite this, margins remained higher than pre-pandemic levels, when typical gains hovered around 45%.
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A surge in apartment construction has stabilized rents, curbing returns for rental property investors. Yet, strong demand persisted as rising home prices locked many would-be buyers into renting.
Investor market share in home sales dropped to 15.9% in the third quarter, the lowest in four years but still close to pre-pandemic norms.
“It’s less appealing to buy homes to flip or rent out than it was at the start of the pandemic, when demand from both homebuyers and renters was robust,” Bokhari said in the report. “But it’s more appealing than it was last year, when soaring home prices and borrowing costs put a big damper on demand.”
Florida, a longtime hotspot for real estate investment, saw significant pullbacks. Investor purchases fell by 23.8% in Fort Lauderdale and 19.4% in Miami, reflecting higher home insurance costs and growing concerns about natural disasters.
Despite the challenges, some markets are bucking the trend. Investor activity surged in Las Vegas, where purchases jumped 27.6%, and Seattle, which saw a 21.8% increase. Investors continue to prioritize single-family homes, which accounted for nearly 70% of purchases in the third quarter, up from 68% a year earlier. By contrast, condo purchases dropped 11.4%, largely driven by declining demand in cities like Miami.
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