Investor homebuying has fallen nearly 50%: Report

Average American homebuyers have reason to rejoice: Recent findings show that the supply of residential real estate being scooped up by corporations has declined sharply, which means less competition for ordinary people.

Year-over-year, businesses bought 46% fewer homes in the fourth quarter of 2022 than in 2021, a new analysis Reported by real estate brokerage Redfin. The recent decline set a new record, putting the 2008 subprime mortgage crisis — during which time investor purchases fell 45% — in second place for the biggest decline since 2000.

The shift to post-pandemic boomtowns was felt most significantly, with Las Vegas and Phoenix reporting the largest declines in investor investment of any metro area – more than 60%. Redfin found that single-family homes and higher-priced properties also saw a steeper drop in investor interest than condos, townhomes and lower-priced properties.

Notably, Redfin noted that investor market share has remained “fairly stable”. This is because individual homebuyers are also buying less.

As reasons for lost investor interest, Redfin blames the current high cost of borrowing money — as the Fed raised interest rates to combat ongoing inflation — and the prospect of home values ​​rising appreciably. is decreasing.

redfin investor market report
The record-breaking decline made 2008 the sharpest ever.
Bloomberg via Getty Images

“A lot of investors are on hold because they’re still seeing declining home prices,” Florida-based Redfin agent Elena Fleck said in the report. “Investors who are in the market are selective and aggressive. Many of them are only offering around [60%] It is very difficult to make a profit when flipping houses right now since the asking price is high.

Other experts believe the change – and the brief competitive hiatus for non-corporate plebeians – will prove fleeting.

redfin investor market report
Las Vegas is one of the US metros seeing the biggest drop in investor investment.
Getty Images

Redfin senior economist Shaharyar Bokhari said, “It’s possible that investors will begin to return to the market this year as mortgage rates come down from their 2022 highs — especially if home prices show any signs of easing.” ” “But it is unlikely that investors will return with the same gusto in 2021. This is good news for individual buyers, who are still grappling with high housing costs, but for investors no longer lost after the bidding war are assuming.”

In 2021, investors piled into the housing market due to extremely low mortgage rates and rising demand for housing. But as studies show that as home prices continue to decline, investors will continue to retreat.

Kurt Carlton of New Western, a real estate investment marketplace, told The Post, “Investors use a range of strategies to buy, flip and sell properties and that means they are always looking for creative financing options and traditional mortgages. Not trusting.”

redfin investor market report
Experts said that even if investor interest bounces back, the market will likely not reach the same level it was in 2021.
Bloomberg via Getty Images

“When rates rise, a full-cash offer becomes an obvious option, but this is just the beginning.”

Still, Carlton said that while most investors have now withdrawn, it leaves room for independent investors to enter the market, and he predicts in the new financial year, there will be more activity.

“Local investors look at each deal individually and know where to put their capital,” Carlton said. “They are experts at understanding their local market and typically focus on opportunities to create value through relocation.”

He continued, “The reality is, we are losing 5 million homes in the US, so at the end of the day, local investors are putting a much needed category of homes back on the list. Many of our investors are buying and fixing up homes that the average home-buyer won’t touch – homes that are in need of major repairs and renovations. And they’re making homeownership more affordable because our investor homes sell for up to 31% less than traditional homes in the same market.

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