Investors Back Away from Home Purchases

Investor interest in single-family homes hasn’t been this low since the Great Recession, according to a report this week from Redfin.

Pandemic boomtowns, including Phoenix and Las Vegas, are feeling it most, as economic uncertainty and the prospect of falling home prices raise the risk of real estate investing. Charlotte has also taken a big hit.

Investor home purchases fell 30.2% year over year nationwide in Q3. (Only the COVID plunge of Q2 2020 was lower since the 2008-09 period.)

This outpaced even the 27.4% drop in overall home purchases nationwide.

In Jacksonville, local Redfin agent Heather Kruayai said in prepared remarks, “Almost all of my listings right now are people looking to sell investment properties or second homes.

“They want to get rid of them now while they still have some value because they’re scared there’s going to be another big crash.”

Investor purchases slumped 26.1% on a quarter-over-quarter basis, the largest quarterly decline on record, other than Q2 2020.

Single-Family Home Rents Continue Sinking

Not helping matters is that single-family rentals, a popular part of the residential segment of commercial real estate, continue to feel pressure on rent growth. reported last week that CoreLogic says that rent growth has decelerated for the fifth month running. “Single-family rents increased 10.2% year over year in September, down from 13.9% in April 2022,” the firm wrote.

Investors Won’t Return ‘Anytime Soon’

Redfin Senior Economist Sheharyar Bokhari said in prepared remarks that it’s “unlikely that investors will return to the market in a big way anytime soon.

“Home prices would need to fall significantly for that to happen. This means that regular buyers who are still in the market are no longer facing fierce competition from hordes of cash-rich investors like they were last year.

“The housing markets that investors are backing out of fastest are those that rose rapidly during the pandemic and are now falling rapidly. That volatility creates a lot of uncertainty, which raises the risk of investors losing money.”

Philadelphia (46.4% year over year), New York (11.2%), Baltimore (8%), Cleveland (5%) and Newark, NJ (less than 1%) were the only five markets among the 40 that Redfin tracks that saw increased investor activity.

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