Real estate investors bought more than one-quarter (26.1%) of lower-priced homes sold in the fourth quarter of 2023, according to new research from Redfin (NASDAQ:RDFN). This marked a new record high and an increase from the 24% share recorded one year earlier.
By comparison, investors purchased 13.6% of mid-priced homes that sold in the fourth quarter (compared to 14.3% one year earlier) and 15.9% of high-priced homes (compared to 15.4% one year earlier).
But while lower-priced homes made up 46.5% of all investor purchases in the fourth quarter, that is down from the 47.2% share in the fourth quarter of 2022. In comparison, mid-priced homes made up 24.6% of the quarter’s share (versus 26.4% one year earlier) and high-priced homes represented 28.8% (versus 26.5% one year earlier).
Single-family homes represented 68.6% of investor purchases in the fourth quarter, followed by condos and co-ops at 19.2%, townhomes at 7.1% and multifamily properties at 5.1%. The metro area with the greatest level of activity was Miami, where investors bought 31.5% of homes that sold in the fourth quarter, while Rhode Island’s capital of Providence had the lowest level of acquisitions at 9.9%.
Nonetheless, investor purchases of U.S. homes fell 10.5% year-over-year in the fourth quarter to 46,419, marking the sixth consecutive year-over-year decline and the lowest fourth quarter level since 2016. Redfin attributed that decline to higher interest rates, elevated home prices and a tight inventory. Some investors decided to shift their money away from housing into other vehicles offering good returns and lower risk.
“It’s too early to say that investor purchases have hit a bottom, but they’re unlikely to shoot up like they did during the pandemic anytime soon,” said Redfin Senior Economist Sheharyar Bokhari. “That’s because borrowing costs and home prices remain high, the number of homes available to buy remains low and rents remain lackluster. If the Fed cuts interest rates later this year as expected, we may see more investors wade into the housing market.”
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In my book, it’s a crime that our government didn’t step in and stop this. It has unbalanced our entire economy and resulted in unrealistic housing prices and an unsustainable market.
Shame, shame, shame.
Sellers Should put their feet down and stop diluting the private home ownership market. Yes, Cash sounds great, but the decision to sell to an investor locks out a family that needs housing!
I think a better solution will be to build more affordable housing. It may take some government incentives and bright planning. Laws to stop investors go against a somewhat free market philosophy.
More affordable housing may work in the short term, but they too will become un-affordable as more and more investors purchase. I, believe at this time, sellers, not buyers, should be incentified to seller to owner occupants by way of either a capital gains tax credit for the seller or an incentive government program in which the seller receives an extra 15k from the govt to sell to owner-occupied. (These monies can come from the first-time homebuyers 15k incentive.)