Investors are buying less than 50% of homes compared to last year

Investors shied away from the US housing market in the final months of 2022, purchasing roughly half as many properties as they did the previous year, according to a Redfin analysis. The data showed that home purchases by investors dropped 45.8% year over year in the fourth quarter and declined 27% from the third quarter. Investors bought $31 billion worth of homes in the period, down 42.7% from a year earlier and down 27.5% from the third quarter. This decline was particularly pronounced in some pandemic boomtowns, where investor home purchases fell nearly 70% year over year in the fourth quarter. Higher mortgage rates and concerns that prices would fall further made the math untenable for many investors, marking a major reversal from a year earlier when rental hedge funds purchased a lot of homes in the valley because rental rates had soared along with home prices. As the market turned, hedge funds and home-flipping companies drastically slowed their investing due to overall market conditions and higher borrowing costs. Real estate agents said iBuying companies – instant-buying companies that use technology to buy and sell properties quickly – have especially slowed their pace. The decline in investor activity has been significant in cities like Nassau County in New York, Atlanta, Charlotte, Nashville, Sacramento, Riverside in California, and Orlando, Florida. The absence of investors was acutely felt in some popular cities during the height of COVID-19, such as Las Vegas, Phoenix, and Charlotte, North Carolina, which saw real estate investment activity decline sharply at the end of 2022. Las Vegas and Phoenix, in particular, led the fourth-quarter drops in investor purchases, down 67% and 66.7%, respectively. This is a stark contrast to 2021, when investor home purchases in Las Vegas increased by 105.5% compared with 2020, while investor purchases made up 28.4% of Phoenix's property market in the fourth quarter of 2021. At one point, iBuyer programs in Las Vegas would make "VERY aggressive offers," but as the market turned, the companies still in the market are making "very conservative offers that are less likely to be accepted," according to Shay Stein, a listing agent for Redfin in Las Vegas.