Redfin’s latest report shows investor activity was more sluggish than normal in the third quarter of 2024. Real estate investors purchased 2.3% fewer homes than last year’s third quarter, which Redfin says is notable after four years of playing it hot and cold due to the unexpected swings during the pandemic-era housing market. In 2021, investor purchases surged 144% year-over-year, then dropped as much as 47% last year.
Currently investor home purchases have settled near pre-pandemic levels of around 50,000 per quarter, with typical seasonal ups and downs. In the third quarter, investors bought 49,380 homes compared with 50,535 last year. During the 2021 homebuying frenzy, investors were buying nearly 100,000 homes per quarter.
“Investors are finding a balance after several years of whiplash,” said Redfin Senior Economist Sheharyar Bokhari. “They bought up homes at a frenzied pace in 2021 and the beginning of 2022, then quickly backed off when the housing market slowed as mortgage rates rose.”
In dollar terms, investors purchased $38.8 billion worth of homes in the third quarter, up 3.4% from a year earlier. That correlates similarly to the uptick in home-sale prices over the same period.
In September, 8.3% of home listings were from investors, down marginally from 8.7% last year and up slightly from the pre-pandemic share. In the third quarter, real estate investors purchased 15.9% of U.S. homes that sold, only shedding three percentage points from Q3 2023's 16.2%, now marking the lowest share since the end of 2020.
Investor market share has fallen closer to pre-pandemic levels, when they bought 14% of homes that sold in the third quarter in 2018 and 2019. At the start of 2022 -- in the golden days when investors were taking advantage of low mortgage rates to buy up properties, investor market share hit a record high of 20.9%.
But, as Bokhari notes, market share appears to be evening out as the number of homes investors are buying has returned to around pre-pandemic levels.
“Now there’s a middle ground,” Bokhari continued. “It’s less appealing to buy homes to flip or rent out than it was at the start of the pandemic, when demand from both homebuyers and renters was robust. But it’s more appealing than it was last year, when soaring home prices and borrowing costs put a big damper on demand.”
Redfin points to a few key reasons investor activity is settling back to pre-pandemic levels.
First, it's harder for investors to buy homes. Because home prices and loan costs are high, it’s harder for investors to sell property for a big profit than it was during the pandemic. In October 2024, a typical home sold by an investor went for 55% more ($181,567) than the investor bought it for — down from a 64% gain a year earlier. However, interest rates are lower than a year ago and homebuying demand has improved a bit over the last few months.
Investors who flip homes are still reaping bigger gains than they were before the pandemic, when homes bought by investors were selling for roughly 45% more. Just 7% of homes bought by investors sold for a loss in October; shortly before the pandemic, the norm was about 10%.
The second reason Redfin points to is the glut of new apartment supply hitting the market which put a lid on rent growth. For landlords, that means it's less profitable to buy a rental property than it was during the pandemic. Still, it signals a strong demand for rentals, largely because the homebuying market is too unaffordable.
Redfin reports that the number of renter households is growing three times faster than that of homeowner households. In the past year, rents have stabilized but they’re still much higher than they were before the pandemic. On the East Coast and in the Midwest, rents are still rising quickly.
Florida Falls Through
Although investor purchases are largely seen stabilizing across the nation, they're falling faster within certain metros and rising quickly in others.
Investor activity fell the most in Fort Lauderdale, Florida, declining 23.8% from last year. After suffering severe back-to-back hurricanes in early Autumn this year, causing home insurance and HOA fees to skyrocket, investors are backing off from the disaster-prone state.
The following metros that each posted 19.4% declines were in Newark, New Jersey and Miami, Florida.
Alternatively, investor purchases are rising in Las Vegas, up 27.6% from last year’s third quarter to mark the biggest increase of any metro in Redfin’s analysis. Following Las Vegas was Seattle, where investor purchases rose 21.8%, and San Jose, California, where they rose 19.5%.
Investor Demand For Condos Sharply Declines
Investor purchases of condos fell 11.4% from the third quarter last year. That marks the biggest decline in a year compared to 3.5% decline in purchases of townhouses, a 2.1% decline for multifamily properties, and a 0.5% uptick for single-family homes.
Florida’s downturn in investor activity partly explains why investor purchases of condos have fallen nationwide. Miami, which normally has the most condo sales of any major US metro, saw investor purchases fall 23.1% year-over-year, primarily because demand for condos in Florida has fallen so much.
Yet, single-family homes were far more popular among investors in the third quarter than any other property type. In the third quarter, single-family homes made up 69.9% of investor purchases, up from 68% a year earlier; condos made up 18.2% of their purchases, down from 20.1% a year earlier; townhouses made up 6.7%, and multi-family properties made up 5.2%, which were both unchanged from last year.
In terms of market share, investors bought 16% of U.S. condos that sold in the third quarter, the lowest share in three years but down just marginally from 16.8% a year earlier. Investors bought 31.1% of multi-family properties that sold in the third quarter, 15.4% of single-family homes, and 14.9% of townhouses, all roughly unchanged year over year.
