Investor Homebuying Drops Nearly 50% in First Quarter

With lower inventory and higher interest rates, investors bought 48.6% fewer homes in the first quarter of 2023.

According to Redfin, this year-over-year decrease is the largest since the site began tracking. Overall home purchases fell as well, but only 40.7%. Investors bought 41,181 homes in the first quarter of 2023, compared to 80,128 in the first quarter of 2022. The record high was 95,124 in the third quarter of 2021, when interest rates were still historically low. Compared to the last quarter of 2022, investors bought 15.9% fewer homes in this past quarter, while overall home buying fell 14.7%. The certainty of a large profit is deterring some would-be investors. The site found that 13.5% of homes sold by an investor in March 2023 sold for less than the original purchase price the investor paid. More than 20% of flippers sold their properties for less than they paid for it. Investors spent $27.5 billion on homes in the first quarter, down 12.4% from 31.4% in the last quarter and down 46.3% from $51.2 billion year over year.

Limited inventory means despite a drop in spending and in overall purchases, the percentage of homes purchased by investors remained stable. In the first quarter of 2023, investors were responsible for the purchase of 17.6% of all homes, compared to 20.4% year over year, which was a peak. The percentage of homes bought by investors remains higher than pre-pandemic levels. Additionally, the percentage of lower-priced homes purchased by investors rose to 48.7%, a peak over the past two years, while 23.6% of purchases were medium-priced, the lowest share in two years. High-priced home sales remained similar throughout the past two years. Investors also purchased more condos in the first quarter, nearly 20% of all purchases, the highest share in five years. Starter homes also represented 41.1% of all investor purchases, the highest percentage in more than two decades.