Real estate investors purchased 2.3% fewer homes in the third quarter of 2024 compared to the same period last year, according to a new report from Redfin (NASDAQ: RDFN). This slight decline marks a period of stabilization following the dramatic fluctuations seen during the pandemic-era housing market. For example, investor purchases surged by as much as 144% year-over-year in 2021, only to plummet by 47% in 2023.
“After years of extreme market swings, investors are finding a more stable middle ground,” said Sheharyar Bokhari, Senior Economist at Redfin. “While it’s less appealing to buy homes for flipping or rental purposes compared to the early pandemic years, it’s more attractive than it was last year when high home prices and mortgage rates stifled demand.”
In the third quarter, investors bought 49,380 homes, slightly fewer than the 50,535 homes purchased during the same period in 2023. This is a significant decrease from the pandemic peak when investors were purchasing nearly 100,000 homes per quarter. Despite this, investor purchases totaled $38.8 billion, reflecting a 3.4% year-over-year increase that aligns with the rise in home-sale prices.
September saw 8.3% of home listings attributed to investors, down slightly from 8.7% last year but still higher than pre-pandemic levels.
The report highlights several factors contributing to the market’s return to pre-pandemic investor activity:
- Profit Margins for Flippers: It’s now harder for investors to buy homes and quickly sell them for substantial profits due to high home prices and loan costs. In October 2024, homes sold by investors fetched an average 55% premium over the purchase price, down from a 64% gain a year earlier. However, this is still a larger gain than the pre-pandemic norm of roughly 45%.
- Rising Rental Market Demand: Although rent growth has been capped by a glut of new apartment supply, strong rental demand persists, largely driven by homeownership affordability issues. The number of renter households is expanding three times faster than homeowner households, and rents remain elevated, especially in the East Coast and Midwest.
In terms of market share, investors bought 15.9% of homes sold in Q3 2024, the lowest share since 2020. This marks a decline from 16.2% last year and represents a return to levels seen in 2018 and 2019, when investors acquired around 14% of homes sold. At its peak in 2022, investor market share reached a record 20.9%.
Regional Trends:
While investor purchases are stabilizing nationwide, significant regional variations are emerging. In Florida, investor activity has dropped notably, with Fort Lauderdale seeing a 23.8% decrease year-over-year, and both Newark, NJ and Miami posting 19.4% declines. These drops reflect broader concerns about the rising frequency of natural disasters and escalating insurance costs in the region.
On the other hand, investor purchases in Las Vegas, Seattle, and San Jose have surged, with Las Vegas seeing the highest growth at 27.6% year-over-year.
Condos, Townhouses, and Other Property Types:
Investor activity also varied by property type. Investor purchases of condos fell 11.4% from the previous year, marking the largest drop in a year. Conversely, purchases of single-family homes increased slightly, making up 69.9% of investor buys, up from 68% a year ago. Townhouses and multi-family properties saw smaller declines in investor activity.
In terms of market share, investors bought 16% of U.S. condos, the lowest share in three years, while their share of multi-family properties rose to 31.1%, maintaining roughly the same level as last year.
Other Metro-Level Highlights:
- Miami saw the highest investor market share of any metro at 28.2%, though it dropped from 31.2% a year ago.
- Providence, RI had the smallest share at 7.8%.
- Detroit saw the largest capital gains for investors, with typical homes sold for 135% more than their purchase price, marking the biggest gain in the report.
Redfin’s findings are based on an analysis of county-level home purchase records across 39 major U.S. metropolitan areas, spanning back to 2000. The report includes both institutional and smaller investors.
