THE REAL DEAL

Purchases dropped by record 49% YoY in Q1: Redfin

Another quarter, another sign of investors’ growing distrust in the housing market after a surge during the pandemic.

Investors purchased 48.6 percent fewer homes in the first quarter than they did a year earlier, according to a Redfin report. The annual decline is the largest recorded by Redfin, which has data going back to the start of the century.

Investors purchased roughly 41,000 homes in the first quarter, down from approximately 80,000 from a year ago. Investor purchases also dropped 15.9 percent from the previous quarter, more in line with the quarter-to-quarter drop in overall home purchases than the year-to-year decline.

The market share for investors remains high, at least by historic standards. In the 40 metros tracked by Redfin, investors bought 17.6 percent of the homes purchased in the overall market in the first quarter. The figure marked a marginal decline from the previous quarter and a more significant decline from the peak of 20 percent in 2022, but still above pre-pandemic levels.

Investors — and individuals — are still coping with high home prices and high mortgage rates, at least compared to the historically low rates that dominated the early months of the pandemic. Rising interest rates are among the factors inhibiting investors, partially because of how they affect purchases, but also how they affect other loans for renovations and expenses.

One home type of particular interest to investors is the starter home, defined as properties of 1,400 square feet or below. In the first quarter, 41.1 percent of investor purchases were starter homes, a record. The buying trends of these more affordable houses are blocking first-time buyers from enticing starter homes.

The biggest drop in investor purchases came in Long Island’s Nassau County, where they fell 67.9 percent year-over-year. Other metros to see a drop greater than 60 percent included Atlanta, Charlotte, Phoenix and Nashville.

No metros had an increase in investor purchases during the first quarter. Baltimore — the lone market to see such a gain in the fourth quarter — sported the smallest fall, down 8.8 percent year-over-year.

Investor market share declined year-over-year in nearly half of the metros analyzed. They had the highest market share in Miami, responsible for 30 percent of home purchases in the first quarter. Anaheim ranked third in investor market share at 22.6 percent.

Condos are making up a larger share of investor purchases. They made up 19.5 percent of investor purchases in the first quarter, the largest share in five years. Single-family homes made up 67.3 percent of investor purchases, the smallest share in six years.