According to a recent study from Redfin, U.S. investor home purchases declined 6% year-over-year in the first quarter to their lowest level since 2020, when the pandemic’s beginning and impact stalled homebuying. The last time investors purchased so few homes before 2020 was in 2016.
The first quarter saw a decline in investor home purchases, primarily due to potential returns being squeezed by high housing costs. Mortgage rates are still twice as low as they were during the pandemic, even if they were somewhat lower in the first quarter than recent high, falling into the low-6% area from over 7% throughout 2025. In the majority of the nation, home-sale prices are still going up. This lowers the profitability of rental homes and flips and raises the cost of purchasing properties for investors.
There are a few other noteworthy reasons why investor home purchases are decreasing, according to the report. In many parts of the nation, home price growth has stalled, and in some markets, prices are declining. Investors are less confident that the value of properties will increase rapidly as a result. At the same time, margins are being reduced, especially for smaller investors, by growing insurance premiums, property taxes, and maintenance expenses.
Gains for investors are also waning. In the first quarter, the median capital gain for a home sold by an investor was $196,618, an increase of 5.3% from the previous year. However, that is nothing compared to the double-digit increases that were typical in 2020 and 2021.
An additional degree of caution has been introduced by economic uncertainty. Instead of increasing their real estate holdings, investors may be pulling back and preserving cash due to worries about the Iran War, inflation, a possible slowdown in the economy, and financial market volatility. Because there are more properties for sale than buyers and there is less pressure to make a purchase right away, some investors are also waiting on the sidelines.
Following the pandemic homebuying craze, investor activity is returning to normal. Investors purchased homes at record levels in 2021 and 2022, when ultra-low mortgage rates and soaring home values made residential real estate especially attractive.
“Higher mortgage rates, slowing price growth and rising construction costs are giving both investors and individual homebuyers pause,” said Tamara Mattox-Kabat, a Redfin Premier agent in Denver. “Flippers and investors are scaling back, and being much more strategic when they do buy homes. They’re buying less expensive materials, and being more careful about timing their projects to list during the stronger spring and summer seasons. It’s also noteworthy that large institutional investors are focusing more on building new homes than buying existing ones.”
Investor Purchases, Trends & Market Shifts
A housing affordability law that prohibits institutional investors from purchasing single-family homes while permitting them to construct more homes was recently passed by the House. Redfin economists point out that prohibiting investors might not have the desired impact, even though legislation to address the housing affordability crisis should be a top priority.
Some 19% of properties sold in the first quarter were bought by real estate investors, a modest decrease from 20% a year earlier. Both individual homebuyers and investors purchased fewer homes in the first quarter; overall pending home sales in March decreased by about 3% year over year. In Q1, investors owned an estimated 7.8% of all U.S. home listings, the lowest percentage in five years. Investors have fewer properties to sell when they purchase fewer properties.
Condo purchases by real estate investors dropped 8% year over year in the first quarter to their lowest level since 2015. Due in large part to growing HOA dues and insurance premiums, condo demand has decreased, making them less appealing to investors.
Investor purchases of townhouses decreased 13% while single-family home sales decreased 6% annually. Single-family homes accounted for 70% of all investor purchases in Q1, compared to 18% for condos and 7% for townhouses, despite the fact that investors bought fewer single-family homes than a year ago.
Low-cost home purchases by investors dropped 10% annually to their lowest first-quarter level in 10 years. They also decreased—albeit less dramatically—throughout the other price points. Overall, investor purchases of expensive homes decreased by 1% and those of mid-priced homes by 6% annually.
The largest reduction among the metro areas in this analysis occurred in Detroit, where investor purchases decreased 35% year-over-year in Q1. The next-biggest decline was in Orlando, FL, where investor purchases fell 25% year over year. Due to the Sunshine State’s home market’s declining prices, excessive inventory, skyrocketing HOA fees, and growing insurance costs, investors have been pulling out of Florida for years. Third place goes to the notable Cleveland metro (-21%).
In contrast, Virginia Beach, VA, and the Bay Area had the biggest increases in investor acquisitions. San Francisco saw a 19% increase in property purchases over the previous year, followed by Virginia Beach (15%) and San Jose (12%). Further, due to the AI boom, investors are attempting to profit on the Bay Area’s booming housing market.
To read the full report, click here.
