The data is in and according to Redfin, investor purchase of residential homes dropped a record 45.8% year-over-year from the fourth quarter of 2021 to the fourth quarter of 2022.
This data comes from a new report published by Redfin. The previous record for the biggest drop was during the Great Recession in 2008.
While investor purchasing activity dropped over the last year, so did all purchases, which were down during the fourth quarter 40.8% year-over-year.
On a quarterly basis, much of the drop occurred during the fourth quarter alone, as on a quarterly basis, investors purchased 27%, which in itself is the largest quarterly drop on record.
“While many investors have pumped the brakes on homebuying, investor market share has remained fairly steady,” Redfin said. “That’s because individual homebuyers have also pulled back. Investors purchased 17.8% of all homes that were bought in the metros tracked by Redfin in the fourth quarter. That’s comparable with 17.6% in the prior quarter and down from 19.4% a year earlier.”
“In dollar terms, investors bought $31 billion worth of homes in the fourth quarter, down 42.7% from $54.1 billion one year earlier and down 27.5% from $42.8 billion one quarter earlier. The typical home investors purchased cost $425,926, little changed from one year earlier but down 5.8% from one quarter earlier.”
But recent drops in mortgage rates and a decline in home prices—however slight—may re-entice investors back into the market.
“It’s possible that investors will start to wade back into the market this year given that mortgage rates have ticked down from their 2022 high—especially if home prices show signs of bottoming,” said Redfin Senior Economist Sheharyar Bokhari. “But it’s unlikely that investors will return with the same vigor they had in 2021. That’s good news for individual buyers, who are still grappling with high housing costs but no longer losing bidding war after bidding war to investors.”
Investor home purchases in the fourth quarter of 2021 were near their record high, which is another reason the year-over-year decline in 2022 was so dramatic. Investors bought 48,445 homes in the metros tracked by Redfin in the fourth quarter of 2022, down from 89,396 a year earlier and 60,447 in the fourth quarter of 2019—before the pandemic.
Investor purchases of mid-priced homes declined 58% year over year in the fourth quarter and investor purchases of high-priced homes fell 53.2%. By comparison, investor purchases of low-priced homes fell 28.6%.
Investors also had the highest market share in the low-priced market; they bought 24.1% of low-priced homes that sold in the fourth quarter, compared with 15% of high-priced homes and 13.8% of mid-priced homes.