Investors are retreating from the U.S. residential real estate market, according to a recent report by Redfin. Investors bought 48.6% fewer homes in the first three months of this year compared to the same period last year. This is the biggest annual decline since the first quarter of 2000 and was more than the 40.7% decline in overall home sales in the country's 40 major metros. The high-interest rates, declining rents, and home values, which followed the pandemic boom, have discouraged investors from viewing residential real estate as a profitable venture. On a QoQ basis, investor purchases dropped 15.9%, comparable with a 14.7% drop in overall home purchases. Redfin's Senior Economist Sheharyar Bokhari said that though investors' purchases have declined, they are still buying a larger share of homes than before the pandemic. He pointed to rising interest rates which have caused a plunge in home values, as reasons for investors taking a step back. Bokhari added that investors have moved towards more affordable, low-priced properties, leaving first-time homebuyers with fewer starter home options to choose from.
Among the 40 U.S. metro cities, the largest decline was seen majorly in the Sun Belt region. Nassau County (67.9%), Atlanta (66%), Charlotte (66%), Phoenix (64.2%), and Nashville (60.4%) saw the largest decline. Other metros to see investor activity plunge over 50% were Las Vegas, Jacksonville, Philadelphia, Tampa, Orlando, and Denver. Except for Nassau County and Philadelphia, all other metros are in the Sun Belt states. The report said investor purchases are declining in Atlanta, Charlotte, Las Vegas, and Phoenix as they were popular among iBuyer investors. Many iBuying companies have slowed or shut down their operations recently. No metro saw an increase in investor purchases during the first quarter. Baltimore, the only metro to register a gain in Q4 of last year, declined by 8.8% YoY. The change in strategy to more affordable properties resulted in condos making a larger share of investor purchases. For the first time since 2018, almost one in five investor purchases were condos. Single-family homes constituted 67.3% of investor purchases, the lowest since 2017. Though a few institutional investors announced plans to increase their exposure to home-buying business, this has not translated into an increase in investor activity. J.P. Morgan's asset-management business launched a joint venture with Haven Realty Capital last year to purchase and develop $1B in houses. JLL's LaSalle Investment Management, along with Amherst Group, planned to buy $500M of homes in the next two years. |
