High Home Prices and Rents Cause Investor Pullback, Giving Homebuyers a Chance
Compared with homebuyers, residential real estate investors are slower to respond to rising mortgage interest rates because most investors make all-cash offers. But recent data suggest professional investors may be tapering off their home purchasing.
In December 2022, investors who typically rent out properties accounted for 8.2% of home purchases, down from the peak of 8.9% in February 2022 but slightly higher than December 2021, according to Realtor.com's Spring 2023 Investor Report, which focused on investors who purchase property to hold and rent out, rather than home flippers.
That decline in investor activity means typical homebuyers could face less competition from investors in the months ahead.
Today’s investors are chasing the same thing as many homebuyers: lower prices. In 2022, 12.2% of all home purchases in the South were by investors, as were 9.3% of all purchases in the Midwest. These two regions generally offer lower home prices than the Northeast and West.
“Affordability is driving so much of the market now,” [ Hannah] Jones says. “The traditionally affordable areas are continuing to see more investor activity. But they’re also seeing more activity from traditional homebuyers.”