One in six homes that sold in the second quarter were purchased by investors, according to a new analysis from the real estate website Redfin.
Investor purchases were up 3.4% compared with a year earlier, notching their largest gain in two years. Single-family homes made up most purchases.
“Elevated home prices and mortgage rates have pushed homeownership out of reach for a lot of Americans which is fueling demand for rentals,” Redfin Senior Economist Sheharyar Bokhari said in a statement. “Investors, many of whom can afford to pay in cash to avoid the sting of high mortgage rates, are cashing in on that demand.”
The report did not distinguish between mom-and-pop investors and institutions. It noted that the largest multifamily acquisition by a public real estate investment trust in seven years took place last week, when apartment owner Equity Residential bought 11 apartment complexes for $964 million. In June, the private equity firm KKR paid $2.1 billion for more than 5,200 apartment units around the U.S.
The researchers noted that apartment construction is slowing, which could prompt rent prices to rebound, inspiring investors to buy in now.
Investor purchases of single-family homes rose the fastest year over year (+6.7%), while investor purchases of multifamily properties fell 5%. Low-priced U.S. homes saw the largest gains in investor purchases. In the second quarter, 24.1% of low-priced homes were purchased by investors, compared with 14.7% of high-priced homes and 12.1% of mid-priced homes.
While investor purchases in the second quarter made up 16.8% of U.S. home sales, it’s lower than the all-time high of 20.8% in 2021 at the height of the pandemic buying boom.
Investor home purchases increased as overall sales fell 1.9% during the same period.
Redfin, which based its analysis on purchase records in 39 of the country’s largest metropolitan areas dating back to 2000, said renter demand is strong even though rent price increases have slowed amid a recent pandemic construction boom that’s brought new units onto the market.
“San Jose has a lot of overseas investors buying sight unseen, and a lot of home flippers who are purchasing dilapidated homes, putting some lipstick on them and selling them for a profit,” Redfin Premier real estate agent Craig Pellegrini said in a statement.
“I’m also seeing parents buy second homes that they plan to rent out for a while and then pass on to their kids, some of whom just graduated college and can’t afford to buy themselves.”
Investor home purchases fell the most in Ft. Lauderdale, Fla. (-15.9%), Providence, R.I. (-12.4), New Brunswick, N.J. (-11.9%), Miami (-11.3%) and Chicago (-11.1%).
San Jose, Calif., and Las Vegas saw the largest increase in investor home purchases in the second quarter. Both were up 27% year over year. Sacramento (+18.9%), Los Angeles (17.9%) and San Francisco (+17.8%) rounded out the top five.