Redfin: Real Estate Investors Bought 16% of Homes in Q3 2024
Investor buying also eased as the U.S. slowed in the third quarter due to growth and higher growth.
The Seattle-based brokerage found that purchases in the third quarter of 2024 fell 2.3% year-on-year, representing little change after four years of fluctuations.
It's based on an analysis of home sales records from the 39 most populous metro areas since 2000. According to Redfin, an investor is “any entity or business that buys residential property,” which includes both institutional and mom-and-pop. investors.
Investors bought $38.8 billion worth of properties in Q3 2024, up 3.4% from a year earlier and in line with rising home prices.
“Investors are finding a balance after several years of whiplash: They bought homes at a frenzied pace in 2021 and early 2022, then pulled back quickly as the housing market slowed as mortgage rates rose,” said Sheharyar Bokhari, chief economist at Redfin. statement.
“Now there is a middle path. When demand from both homebuyers and renters is strong, compared to at the start of the pandemic, homes are being bought to flip or rent. But it's more attractive than it was last year, as rising house prices and borrowing costs have largely dampened demand.”
Redfin highlighted that investors bought 15.9% of all homes sold in the third quarter of 2024, down from 16.2% a year ago and the lowest share since the end of 2020. The highest recorded share of homes bought by investors was 20.9% of investors in the first quarter of 2022. they used low mortgage rates.
Investors have had trouble buying and selling homes for income, which Redfin attributed to rising home prices and mortgage rates. The typical sales price for an investor-owned home in October was 55% of what most investors paid, or $181,567. That was down from a 64% gain a year ago. But Redfin noted that “interest rates are lower than they were a year ago and demand for home purchases has improved somewhat over the past few months.”
Low-cost homes – those in the bottom third of the local market – accounted for 45.7% of investor purchases. The share of high-priced and medium-priced houses was 30.4% and 23.9%, respectively. Investors prefer lower-priced homes because of lower purchase costs and larger pools of potential buyers or renters, Redfin noted.
Miami (28.2%); Anaheim, California (24.3%); and San Diego (23.3%) had the largest share of investor home purchases of all metro areas analyzed. The next places were taken by Las Vegas (22.9%), San Francisco (21.4%) and Los Angeles (20.9%).
Detroit had the largest return on investment (ROI), with the typical investor selling a home for 135%, or $121,500—up from $90,000 of the original purchase price. Philadelphia (109%) and Newark, New Jersey (106%) followed closely behind.
Redfin notes that more than half of the metros analyzed saw year-over-year declines in ROI, led by Washington, D.C., Phoenix and Oakland, Calif.
Miami saw a 19.4% year-over-year decline in investor purchases, despite having the largest investor share of any city. Investor purchases in neighboring Fort Lauderdale also fell 23.8%, indicating growing concern for the Florida housing market.
“Investors are turning away from buying homes in Florida for similar reasons: Florida has become a less desirable place to live as natural disasters increase in intensity and frequency. On top of that, and HOA fees are skyrocketing,” Redfin said.
