Investor home purchases halved since the height of the Pandemic Housing Boom

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During the housing frenzy in 2021, homeowners found themselves inundated with inquiries from investors eager to gauge their interest in selling. Whether through text messages, mailers, or cold calls, the barrage seemed never-ending.

According to Redfin, investors in the U.S. acquired 92,802 homes in Q4 2021—an increase of +46% from the 63,350 homes purchased in Q4 2019.

However, this housing frenzy, fueled by ultralow rates, stimulus measures, and the rise of remote work, dissipated when the Federal Reserve shifted towards inflation-fighting measures. Mortgage rates surged from 3% to over 6% in 2022, causing capital markets to tighten. The higher rates posed challenges for a wide range of housing investors, from mom-and-pop landlords and amateur Airbnb hosts to home flippers and institutional operators, making it increasingly difficult for new rentals to pencil.

In Q4 2022, investors purchased 51,881 homes, marking a -44% decrease from Q4 2021.

The most recent data released by Redfin on Wednesday indicates that investor activity remains subdued. In Q4 2023, investors acquired 46,419 homes, representing a -11% decline from Q4 2022 and a -50% drop from Q4 2021.

Click here to view an interactive chart displaying investor purchases in 40 major housing markets (excludes non-disclosure states like Texas)

“Investor home purchases have fallen as high interest rates, elevated home prices and a sluggish rental market have made investing less lucrative. Some investors have shifted their money into other investments that offer good returns and lower risk, such as Treasury bonds,” wrote Redfin on Wednesday.

Click here to view an interactive version of the chart below

One thing to remember is that investor purchase levels vary greatly across the country.

Booming markets in the Sun Belt, like Atlanta and Phoenix, were darlings for both big and small investors during the Pandemic Housing Boom. So it only makes sense that on an aggregate basis those markets saw a bigger pullback once mortgage rates spiked.

Click here to view an interactive version of the chart below

Overall, Redfin reports that investors made up 18% of all housing transactions in Q4 2023.

The vast majority of investor purchases are made by small landlords who own fewer than 10 properties. In fact, according to John Burns Research and Consulting, institutional investors—operators owning at least 1,000 homes—accounted for just 0.4% of home purchases in Q2 2023.

Invitation Homes—one of the largest owners of U.S. single-family homes—was a net buyer (just barely) for the second straight quarter. It acquired more homes (460 homes) than it sold (398 homes) in Q4 2023, as reported on Tuesday.

The significant jump in the chart below last quarter was due to Invitation Homes acquiring a portfolio of 1,870 homes from Starwood—reportedly, Starwood needed liquidity due to troubles in its commercial segment.

ResiClub’s view: The institutional homebuying sector remains “constrained” for the time being. It’s hard to make the math work right now.