Investor Home Purchases Declined 30% in Q3
New York, NY, November 22, 2022-Investor buying of homes tumbled 30% in the third quarter, a sign that the rise in borrowing rates and high home prices that pushed traditional buyers to the sidelines are causing these firms to pull back, too, reports the Wall Street Journal.
“Companies bought around 66,000 homes in the 40 markets tracked by real-estate brokerage Redfin during the third quarter, compared with 94,000 homes during the same quarter a year ago. The percentage decline in investor purchases was the largest in a quarter since the subprime crisis, save for the second quarter of 2020 when the pandemic shut down most home buying.
“The investor pullback represents a turnaround from months ago when their purchases were still rising fast. These firms bought homes in record numbers last year and earlier this year, helping to supercharge the housing market.
“Now, investors are reducing their buying activity in line with the decline in overall home sales, which have slumped with mortgage rates rising fast. But with investors’ large cash positions, and with big firms such as JPMorgan Chase & Co. planning to increase its exposure to the home-buying business, investors are poised to resume more aggressive buying when rates or home prices begin to ease.
“These firms have seized on a pandemic-driven rise in demand for houses in suburban areas. These owners rented out the homes and increased rents on homes by double-digit percentages. By the first quarter of 2022, investors accounted for one in every five home purchases nationally.
But ballooning borrowing costs have kept investors from buying as much recently, said John Pawlowski, an analyst at Green Street. Buyers and sellers are also agreeing less often on pricing, stifling sales.
“‘It leads to a lot of people just putting down the pen,’ Mr. Pawlowski said.
“Rent growth has also begun to slow. Rents for single-family homes rose 10.1% year over year in September, down from 13.9% in April, according to housing data firm CoreLogic.”