Investor purchases of single-family homes plunged 32% in the third quarter, the biggest drop in “pandemic boomtowns”

“The prospect of substantial house price declines puts them at risk of losing money.”

By wolf richter For wolf street,

Based on county records in the 40 most populous metropolitan areas, investor purchases of single-family homes declined 32.3% in the third quarter compared to the same period last year, according to Redfin. This was the biggest percentage decline since the housing bust, following the lockdown of the second quarter of 2020.

Investor purchases of condos and co-ops fell 27.5%; 17.9% of townhouses, and 18.3% of multi-family buildings with 2-4 units.

The chart shows the number of homes purchased by category of homes; And on the right, the year-over-year percentage decline. These “investors” are defined as institutions or businesses that buy residential properties. (via Chart redfin,

The increase in investor purchases in recent years also reflects the influence of a major shift: rental construction, where home builders build entire subdivisions specifically as rental homes, fill them with tenants, and then build entire developments. Let’s sell it to a big fund manager. The most popular development in the build-to-rent housing market was before the recession.

“Real estate investors are holding back as the prospect of a steep drop in home prices puts them at risk of losing money,” Redfin reports. The biggest buyers of single-family homes — American Homes 4 Rent, Invitation Homes and others said in its earnings call.

For example, American Homes 4 Rent, which in recent years has focused on buying build-to-rent developments, said that It had cut its purchases by 80% year-on-year “Allow the market time to recalibrate and stabilize” as home prices have not yet come down significantly. “We’re starting to see some price discovery happening. But we’re still early in that process. It said these homebuilders still want prices that “you might have seen in March.”

According to Redfin, “It is unlikely that investors will return to the market in a big way anytime soon. Home prices would need to drop significantly for this to happen.”

“Investors buy heavily in pandemic boomtowns”: Redfin.

Some of the metros where investors had invested with great passion are now witnessing a sharp drop in investor buying.

“Investors expanded into these areas during the pandemic to capitalize on rising rent prices and home values, and are now pulling back as these markets have slowed relatively quickly”:

Metros with biggest % decline in investor purchases: Q3 2022
% YoY
Phoenix, AZ -49.4%
Portland, OR -47.4%
Las Vegas, NV -44.8%
Sacramento, CA -43.2%
Atlanta, GA -42.2%
Charlotte, NC -41.7%
Miami, FL -37.7%
Denver, CO -36.4%
San Diego, CA -34.5%
Riverside, CA -33.8%

Investor purchases increased year-over-year in only five of the 40 metros analyzed by Redfin: Philadelphia (+46%), New York (+11%), Baltimore (+8%), Cleveland (+5%), and Newark (less than 1%).

Share of investors in total purchases in Q3,

Combined in those 40 metros, investors bought 65,000 homes of all types, accounting for a 17.5% share of all home purchases, up from a 19.5% share in Q2 and down from 18.2% a year ago, as total purchases fell And investor buying has declined faster than individual buying.

This trend was also highlighted by the National Association of Realtors through October, which reported a 28% year-over-year decline in existing home sales nationwide, and Investors’ stake is falling further in falling sales,

According to Redfin, investors had the highest market share in these markets:

  • Jacksonville, FL (29.6% share);
  • Miami (28.9%)
  • Atlanta (27.6%)
  • Las Vegas (26.9%)
  • Orlando, FL (26%).

In terms of Jacksonville, overall purchases fell, despite a larger share of investor purchases, and investor purchases fell 31.9% year-over-year with them! “Many investors are looking to sell properties,” according to Heather Kruyai, a local Redfin agent: “Almost all of my listings right now are people looking to sell investment properties or second homes. They want to get rid of them now while They still have some value because they are afraid that another big crash is about to happen.

Investors had the lowest market share in these markets:

  • Montgomery County, PA (7.1%)
  • Providence, RI (7.3%)
  • Warren, MI (7.7%)
  • Washington, DC (8.6%)
  • New Brunswick, NJ (9.7%).

Investor buying fell across the price spectrum,

Year-on-year decline in investor buying by price category (via chart) redfin,

  • high priced homes (-35.7%)
  • median-priced homes (-37.1%)
  • Affordable Homes (-20.0%)

“Investors” in the housing market fall into a variety of categories.

There are big money managers like Blackrock and Blackstone and pension funds who buy entire built-to-rent developments from home builders or whole companies that are already big landlords, Rental REITs, such as American Homes 4 Rent and Invitation Homes, also buy entire build-to-rent developments. These companies are not competing with individual home buyers; They are buying established rental properties.

Then smaller investors are buying homes as rental properties, and they are competing with individual home buyers. But they face high mortgage rates and falling home prices that make it a tough call.

A relatively new development in the investor landscape is the i-buyer phenomenon where companies funded with investors’ money pile into the house flipping business. This event has already collapsed. Zillow called it quits last year amid huge losses., Redfin threw in the towel this year. Opendoor, having nothing else to go back to, has cut down on its purchases. The company, which went public through a merger with a SPAC in December 20202, lost $928 million in Q3, bringing its total losses since 2019 to $2.2 billion. And every house he bought he had to sell, and it turned out to be harder than expected, Its shares, now at $1.64, are down 95% from their peak and are in my penance. broken stock,

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