Mortgage rates and home prices could still be near record highs thanks to a lack of supply of homes, but that hasn’t stopped real estate investors from buying in the first quarter, according to the recent investor purchases report
While the number of investor purchases is below the level of the recent times and is falling to the lowest level since 2020, the number of investor buyers was 14.8 — in the first quarter of 2024, the highest share in existence.
In other words, although “investors took a bigger slice of the pie than in any other quarter, the pie was much smaller,” Hannah Jones, Realtor.com senior economic research analyst, wrote in a press release.
Investors are buying fewer houses, but their stock growth has increased, which may partly have to do with a general slowdown in home sales. Home sales have fallen to the lowest level in 10 years nationwide. And although investors bought the same number of houses as in the first quarter of 2023, the purchases of non-investors decreased by 6,1%, according to Realtor.com .
However, compared to the pre-recent times level, investors are buying more: they bought 10.6% more houses in the first quarter of 2024 than in the same quarter of 2019.
So, although there may be a general slowdown compared to the rush to buy a house a few years ago, more and more investors are turning to real estate.
A changing landscape for investors?
One thing that has changed since the recent times is that there are fewer cash buyers and more smaller investors.
During the peak of the recent times’s shopping frenzy, many shoppers used cash to outbid others. Investors were more likely to pay in cash as they were likely to have access to capital, Jones wrote. However, the share of investors using cash decreased to 64% in the first quarter of 2024 from 69.7% at the peak of cash purchases in the fourth quarter of 2021.
This change is a combination of fewer larger investors who have cash available to buy and more smaller investors who invest in real estate and use debt for investments, Jones explained.
In the first quarter of 2024, retail investors accounted for 62.6% of investor purchases, the highest share since Realtor.com . They are also investing more, with a 6.4% increase in properties purchased by retail investors.
Meanwhile, the share of large investor purchases has decreased to 13.9%. Compared to the same period in 2019, purchases by retail investors increased by 34.3% in the first quarter of 2024, while purchases by medium and large investors decreased by 4.9% and 22.3%, respectively.
