Although the U.S. housing market may be slowing in the second quarter of this year, investors are not letting down their guard.
According to a report released on Thursday, the number of homes purchased by investors increased by 3.4% annually in the second quarter of 2024, the largest increase since the second quarter of 2022. redfin tuna.
By comparison, total U.S. home purchases fell 1.9% during the same period, which Redfin attributed to rising mortgage rates and home prices. While investors remain sensitive to changes in mortgage rates, they are less sensitive than consumer buyers as 69% of investors pay in cash.
The study is based on an analysis of county-level home purchase records since 2000 in the nation’s 39 most populous metropolitan areas. Institutional investors and retail investors.
Overall, investors purchased $43 billion worth of homes in the second quarter, an annual increase of 13.7% and the largest increase in two years.
Redfin found that investors purchased 16.8% (about one in six) of the homes sold in the second quarter of 2024, up from 16% a year ago. This is the highest share ever for a second quarter after 2022 (20.8%).
Redfin said data for the second quarter of 2024 showed investor activity was stabilizing after more than doubling during 2021 during the pandemic-driven homebuying boom. That number plummeted nearly 50% in 2023 as rents and home values fell in some markets.
Although rental demand remains strong, rental price growth has been slow due to the large number of new apartments coming on the market, creating competition for tenants. But multifamily construction starts have slowed, which is good news for landlords looking to raise rents.
Redfin attributes the growth to investors exiting the sidelines faster than consumer buyers.
“One reason real estate investors are coming out of hibernation is to take advantage of strong demand from renters,” Sheharyar Bokhari, senior economist at Redfin, said in a statement.
“Rising home prices and mortgage rates have made homeownership unaffordable for many Americans, fueling demand for rentals. Investors are cashing in on this demand, many of whom can afford to pay cash to avoid the pain of high mortgage rates.
Additionally, the brokerage noted that increased investor activity was driven by single-family home purchases, which increased 6.7% year-over-year in the second quarter of 2024. to four units); condos and co-ops; and townhomes fell 5%, 3.3% and 1.9% respectively.
Overall, single-family homes accounted for 69.4% of total investor purchases in the second quarter of 2023, the highest share since mid-2022. Apartments and co-ops accounted for 19.4%, followed by townhomes (6.5%) and multifamily buildings (4.7%).
Redfin notes that investors generally prefer single-family homes because of the market’s relatively strong rental growth and low tenant turnover.
Supporting this data is a recent report Mortgage Bankers Association (MBA) found that multifamily lending fell 49% in 2023 to $246 billion.
“Multifamily lending will fall by about half in 2023 as sales transactions decline and significantly fewer homeowners seek to refinance their loans,” Jamie Woodwell, MBA’s director of commercial real estate research, said in a statement.
In terms of return on investment (ROI), Redfin reported that the typical home sold by investors in June sold for 58% more than when investors bought it, down from 62.1% a year ago but still higher than pre-pandemic. level. Only 5% of homes sold by investors saw a loss, down from 5.8% in the second quarter of 2023 and below pre-pandemic levels.
This can be attributed, at least in part, to the fact that investors purchased 24.1% of lower-priced homes sold in the second quarter of 2024, up from 22.7% a year ago. In comparison, 14.7% of high-priced homes and 12.1% of mid-priced homes were purchased by investors.
Lower-priced properties (what Redfin calls properties priced in the bottom third of the local market) accounted for 45.2% of all investor home purchases in the second quarter. The proportions of high-end residences and mid-priced residences were 30.9% and 23.9% respectively.
Of the markets analyzed, San Jose and Las Vegas saw the largest annual increases in investor home purchases (up 27%). Three other California metropolitan areas – Sacramento (+18.9%), Los Angeles (+17.9%) and San Francisco (+17.8%) – rounded out the top five.
The San Jose metropolitan area also had the largest increase in total home purchases in the second quarter of 2024, with an annual increase of 15.2%, while the San Francisco metropolitan area had the largest annualized increase in investor returns on properties sold in June. The typical San Francisco home sold to investors for $685,500 more than the original purchase price, up 50.7% from a year ago.
“San Jose has a lot of overseas investors buying properties sight unseen, and a lot of flippers buying dilapidated homes,” said Craig Pellegrini, an agent with Redfin Premier in San Jose. , put lipstick on it and sell it for profit.
“I also see parents buying second homes with the plan to rent them out for a while and then pass them on to their children, some of whom are fresh out of college and can’t afford to buy their own. Many people with tech money bought homes here in the early 2000s , amassed a large stake and now have a side hustle as a real estate investor, but others rented in neighborhoods like Mountain View and Los Altos and then built equity by buying investment properties in San Jose, where housing prices were lower.
On the other hand, investor home purchases declined the most year-over-year in Fort Lauderdale, Florida (-15.9%); Providence, Rhode Island (-12.4%); and New Brunswick, New Jersey (-11.9%); Miami (-11.3%); and Chicago (-11.1%).
“While rents are high here, insurance rates and property taxes are also high, making these numbers prohibitive for investors,” Bob Benson, a broker with Redfin Premier in Fort Lauderdale, said in the report. It’s hard to understand.
Miami market (28.5%); San Diego (23.7%); Anaheim, California (23.3%); Las Vegas (22.3%); In the second quarter of 2024, the highest proportion of investor home purchases is in Los Angeles (22.2%). Washington, D.C. (8.7%); Warren, Michigan (9.2%); Montgomery County, Pennsylvania (9.5%); and Seattle (9.7%) have the smallest market shares.
