Real estate investors bought a record 18.4 percent of the homes sold in the fourth quarter, according to a Redfin report. That’s up from 12.6 percent a year earlier and a revised rate of 17.4 percent in the third quarter.
Although investor market share hit a record in the fourth quarter, the number of homes bought by investors declined 9.1 percent from the third-quarter peak, but it’s up significantly from pre-pandemic levels. Investors bought 80,293 homes in the fourth quarter, up 43.9 percent year-over-year.
Investors are taking advantage of intense demand for rentals and increasing prices, with the average monthly rental payment for a new lease up 14 percent in December. Just over three-quarters (75.3 percent) of investor home purchases were paid for with all cash in the fourth quarter.
“While record-high home prices are problematic for individual homebuyers, they’re one reason why investor demand is stronger than ever,” Redfin Economist Sheharyar Bokhari said in a release. “Investors are chasing rising prices because rental payments are also skyrocketing, incentivizing investors who plan to rent out the homes they buy.
“Investors buying up a record share of for-sale homes is one factor making this market difficult for regular homebuyers. It’s tough to compete with all-cash offers, and rising mortgage rates have a smaller impact on investors because they often don’t use mortgages at all. If home-price growth slows in the coming year, investor demand may cool down because rental price growth will slow, too.”
In dollar terms, investors bought $49.9 billion worth of homes in the fourth quarter, up from $35 billion a year earlier. The typical home investors purchased sold for $432,971, up nearly 10 percent from a year earlier.
Mid-priced homes represented 32.3 percent of investor purchases in the fourth quarter, a record high and up from 24.1 percent a year earlier. Low-priced homes made up 37 percent, a record low and down from 44.5 percent a year earlier. High-priced homes represented 30.7 percent of investor purchases, up slightly from 30 percent in the third quarter but down slightly from 31.4 percent year-over-year.
“Lower price points are still popular with investors, and I don’t expect that to change. One of their main goals is still to buy low and sell high,” Bokhari said. “But investors are also increasingly interested in higher-priced properties, partly because there’s a lack of low-priced inventory and partly because they’re betting on rising demand for high-end rentals.”
Single-family homes made up about three-quarters (74.8 percent) of investor purchases in the fourth quarter. That’s near the highest level on record, essentially tied with the third quarter (75 percent), and up from 72.2 percent a year before.