U.S. real estate investors bought about 52,000 homes in the second quarter, the lowest level for that period since 2020, according to a report from Redfin.
Purchases were down 6% from a year earlier — the largest drop since late 2023.
Redfin, which analyzed purchase records across 39 major metropolitan areas, defines an investor[1] as any institution or business buying residential property, covering both large firms and small-scale buyers.
The decline comes as investors face the same pressures as individual buyers; high borrowing costs, elevated prices[2] and economic uncertainty.
At the same time, asking rents have softened and short-term rental markets have cooled in some cities, the report[3] said.
“For real estate investors, the numbers just don’t pencil out the way they did a few years ago, whether they’re looking to flip a home or rent it out,” said Redfin Senior Economist Sheharyar Bokhari. “It costs a lot to buy a home, and potential returns are simultaneously softening. That doesn’t mean investors are disappearing — they’re still buying nearly one in five homes in the country — but they’re being choosier about their home purchases, just like individual homebuyers.”
The typical investor earned nearly $196,000 in capital gains on homes sold in the quarter, up 1.7% from last year.
That’s far lower than the more than 30% annual gains seen in early 2021. Roughly 7% of investor sales in the quarter resulted in a loss, up from 5% a year earlier.
Condo purchases fall sharply
Investor demand for condos[4] dropped 13% year-over-year, the steepest decline for any property type and the lowest second-quarter level since 2013, excluding the pandemic.
By comparison, investor purchases of single-family homes[5] and townhouses slipped 4%, and multifamily properties fell 2%.
Condos have grown less appealing because of rising homeowners association fees, special assessments and higher insurance costs[6].
Investors who once bought condos to rent out are finding slower rent growth and rising vacancies — while condo values typically appreciate more slowly than single-family homes, Redfin added.
“The condo market is the slowest I’ve seen in at least a decade,” said John Tomlinson, a Redfin Premier agent in Fort Lauderdale, Fla. “Buyers are wary of putting offers on condos — and many are cancelling contracts after they’ve made offers — because costs have increased so much and they’re nervous that they’ll continue rising in the future.
“HOA fees are high, a lot of insurance companies won’t cover condo buildings on the coast, and some mortgage lenders are quoting higher rates for condos. If you’re an investor, you can’t count on making money from a condo right now.”
Regional shifts
Florida[7] saw the sharpest declines in investor activity. Purchases fell 25% year-over-year in Orlando and 21% in Fort Lauderdale — with smaller drops across Jacksonville, West Palm Beach, Tampa and Miami.
By contrast, investor purchases rose in several West Coast cities, led by Seattle (51%), San Francisco (24%) and Portland, Ore. (14%).
Overall, investors bought 17% of U.S. homes sold in the quarter, essentially unchanged from last year. Their share of purchases was steady across most property types, suggesting investor activity is declining at the same pace as the broader housing market.
References
- ^ investor (www.housingwire.com)
- ^ elevated prices (www.housingwire.com)
- ^ report (www.redfin.com)
- ^ condos (www.housingwire.com)
- ^ single-family homes (www.housingwire.com)
- ^ higher insurance costs (www.housingwire.com)
- ^ Florida (www.housingwire.com)