The level of investor activity in the housing market increased during the first quarter of 2024, the first such increase since 2022. After extreme volatility in the investor share of home purchases—including large spikes during the pandemic home buying boom of 2021 and significant drop offs in 2023—activity levels have stabilized in recent quarters.
According to Redfin, real estate investors bought roughly 44,000 homes in the first quarter, a 0.5% increase from the first quarter of 2023. The relative increase in investor activity can be attributed to rising home prices and rents and the relative stability since interest rate shocks, according to Redfin.
Another potential contributor to greater investor activity: investors are making more money than a year ago on home sales. The typical home sold by an investor in March went for 55.2% more than the investor bought it for, representing roughly $175,000 in profit. Investors made an average of $146,586 in profit a year ago. Additionally, just 5.3% of home sold by investors sold for a loss in March of 2024, down from 13.7% in March of 2023.
While investors are purchasing a lower number of homes than during the pandemic housing frenzy, due to the relatively slow market investor purchases still represent a high share of homes sold. Investors bought 18.7% of homes sold in the first quarter, up from 17.9% a year ago and the highest share in almost two years.
Investor purchases of single-family homes rose 3.9% year-over-year in the first quarter, the first such increase in nearly two years. Single-family homes represented 68.9% of investor purchases in the first quarter, the highest share since mid-2022. Investor purchases of townhomes, condos, and multifamily properties fell 8.6%, 6.4%, and 2.5%, respectively. Redfin said the appeal of the single-family market is likely the relative strength of rent growth and lower tenant turnover in the single-family sector.
According to Redfin, investors were actively purchasing both high and low price point homes in the quarter. Purchases of high-priced homes jumped 10.5% compared to the first quarter of 2023 while low-priced homes represented nearly half of all investor purchases in the quarter. The typical home bought by investors in the first quarter cost $464,560, up 9.2% from a year earlier.
Investors purchased a record 26.1% of low-priced homes that sold in the first quarter, compared with 16.4% of high-priced homes and 13.4% of mid-priced homes. The activity level and interest in affordable homes in the entry-level market from investors comes at a time when many would-be first-time buyers are priced out of the market either due to asking price or interest rates. Increased competition and bids for such affordable homes likely make it more difficult for non-cash buyers.
Regionally, investors were most active in California, while home purchases declined in the relatively affordable markets of the Midwest and East coast.
In the first quarter, investors purchased the highest share of homes in Miami (30.6%), followed by Cleveland (24.6%); Jacksonville (24.5%); San Diego (23.6%); and San Francisco. Investors purchased the lowest share of homes in Providence, Rhode Island (10.5%); Montgomery County, Pennsylvania (10.8%); Warren, Michigan (11.3%); and Washington, D.C. (11.7%).
Investors experienced the greatest improvement in market share in Oakland, California, Las Vegas; Tampa; Phoenix; and Riverside, California. The biggest decline in investor market share occurred in Cincinnati; Baltimore; Chicago; and Providence, Rhode Island.
