Investor Purchases in Real Estate Plummet in Q3

The rollercoaster of investor activity in the housing market continued with an epic plummet in the third of quarter 2022, according to the latest data from Redfin.

• Y-O-Y: Investor home purchases fell 30.2% year over year nationwide in the third quarter, the biggest decline since the second quarter of 2020 and the second largest decline since the Great Recession.

• Q-O-Q: Investor purchases slumped 26.1% on a quarter-over-quarter basis, the largest quarterly decline on record with the exception of the start of the pandemic.

Billions. Investors bought $42.4 billion worth of homes in the third quarter, this is down 26.3% from $57.6 billion one year earlier and down 30.5% from $61 billion one quarter earlier.

Boomtowns No More. Investor activity saw the biggest drop in metro areas that were booming during the pandemic. Phoenix took the top spot with an almost 50% drop year-over-year in the third quarter of 2021.

• Portland was number two with a 47.4% decline followed by Las Vegas (-44.8%) and Sacramento (-43.2%).

Analysis. Sheharyar Bokhari, Redfin Senior Economist, said investors are unlikely to return anytime soon. “It’s unlikely that investors will return to the market in a big way anytime soon. Home prices would need to fall significantly for that to happen…This means that regular buyers who are still in the market are no longer facing fierce competition from hordes of cash-rich investors like they were last year.”

BOTTOM LINE: For two years affordable housing activists have been trying to come up with a way to keep investors out of single-family neighborhoods. Turns out all you needed was substantially higher rates and a declining market and they leave on their own.