Investment in the U.S. homes market fell to its lowest level in nearly 10 years as real estate investors picked up 47,004 homes during the fourth quarter, a 3.9% year-over-year decrease. This is the biggest decline in a year, according to a Redfin analysis of county-level home purchase records across 39 markets.
Investors are facing the same challenges as other home buyers, including a slowing housing market driven in part by high prices, tepid demand with plateauing rents, economic uncertainty accompanying the transition to the Trump administration, and continued high interest rates. Investors are typically less sensitive to mortgage rates than regular home buyers because about 65% pay in cash, but loans they take to cover home-flipping costs and other expenses are impacted. Fears about not achieving an acceptable rate of return or having to sell at a loss could be weighing on investors, said Redfin.
Investor market share fell to 17% of homes sold during the fourth quarter, down from 19% a year earlier and the lowest level for the fourth quarter since 2020, Redfin said.
Florida is experiencing the sharpest investor retreat, with purchases down 28% year-over-year in Orlando, 21% in Miami and 14.5% in West Palm Beach, according to Redfin. Investor market share also fell in the state during the fourth quarter, with investors purchasing 20.7% of homes in Orlando, down from 26.6% a year earlier and 21.1% of homes in Jacksonville, down from 25.8%.
The state is likely feeling the effects of the increasing frequency and intensity of natural disasters along with soaring HOA fees and insurance costs, said Redfin. Six of the 10 metros Redfin recently ranked as buyer’s markets are in Florida, and investors hoping to sell for profit are encountering competition with Florida for-sale inventory at a record high.
Chicago; Atlanta; Riverside, California; and Charlotte, North Carolina, were also impacted by decreased investment activity and shrinking investor market share. Meanwhile, investor purchases and market share increased in the San Francisco Bay Area, Seattle, San Jose, Oakland and Detroit.
Purchases of condos fell 13% year-over-year to their lowest fourth-quarter level since 2012, with investors purchasing 8,220 of those housing units, the report found. Purchases of single-family homes fell 1.6% year-over-year, and purchases of townhomes fell 6.1%, the report said. Investors bought 2.9% more multifamily properties than a year earlier during the fourth quarter.