Published by Forbes.com | February 15, 2023
Last quarter’s drop in investor purchases surpassed the largest decline during the subprime mortgage crisis in 2008, when investor purchases slumped 45% as the housing market abruptly imploded.
The number of homes scooped up by investors fell at a record pace last quarter amid higher mortgage rates and forecasts calling for substantial declines in home prices—further clouding the outlook for real estate investing but a positive development for potential home buyers looking to reap the benefits of falling housing prices.
Investors bought some $31 billion worth of U.S. homes in the fourth quarter as the number of homes purchased fell a record 45.8% year over year—outpacing the 40.8% decline in overall home purchases over the same period, according to a recent report from real estate brokerage Redfin.
Ushering in the stark decline, home prices have fallen 11% from their peak last spring as rising mortgage rates dampened home buyer demand, making it more expensive to borrow money and eating into real estate profits—encouraging many investors to turn to other asset classes offering better returns, Redfin notes.
The average rate on the popular 30-year mortgage climbed to nearly 6.4% last week from 6.2% one week prior and 4.05% one year ago, the Mortgage Bankers Association reported Wednesday, attributing the uptick to stubborn inflation and expectations the Federal Reserve will keep monetary policy restrictive for a longer time.
In a statement, Redfin economist Sheharyar Bokhari said it’s “possible investors will start to wade back into the market this year” if home prices show signs of bottoming, but he posits it’s “unlikely” they’ll return with the same vigor they had in 2021, when investor home purchases neared a record high amid rock-bottom mortgage rates and surging demand.
