Redfin Reports Investor Home Purchases Fell 30% in Third Quarter; Sacramento area among most affected
In a further sign of the effects of higher interest rates, Redfin today reported investor purchases dropped by 30 percent in the third quarter, the worst since the Great Recession.
Aside from the second quarter of 2020, this is the largest decline since the Great Recession, when investor activity plummeted due to the onset of the pandemic. It outpaced a 27.4 percent drop in overall home purchases nationwide.
Investor purchases slumped 26.1 percent on a quarter-over-quarter basis, the largest quarterly decline on record with the exception of the start of the pandemic. That compares with a 17.4 percent quarterly drop in overall home purchases.
“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,” Redfin Senior Economist Sheharyar Bokhari said. “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.”
Investors Purchases Plummet in Pandemic Boomtowns
In Phoenix, investor home purchases slumped 49.4% year over year in the third quarter, the largest decline among the 40 metros Redfin analyzed. Next came Portland, OR (-47.4%), Las Vegas (-44.8%), Sacramento, CA (-43.2%) and Atlanta (-42.2%). Rounding out the top 10 are Charlotte, NC, Miami, Denver, San Diego and Riverside, Calif.
Many of the metros where investor purchases declined significantly are places that soared in popularity during the pandemic. Phoenix, Las Vegas, Sacramento, Miami and San Diego consistently rank on Redfin’s list of top migration destinations, which is based on net inflow, or how many more Redfin.com users are looking to move into a metro than out.
“The housing markets that investors are backing out of fastest are those that rose rapidly during the pandemic and are now falling rapidly,” Bokhari said. “That volatility creates a lot of uncertainty, which raises the risk of investors losing money.”
