Despite record-high home prices, a growing number of real estate investors are now returning to the US housing market due to the possible growth of rental demand.
In the second quarter of 2024, real estate investors bought one in every six homes that were sold in the period. That represented a 3.4% year-over-year increase in investor purchases of US homes. In addition, investor purchases in the second quarter of 2024 totaled $43 billion, marking a 13.7% increase from a year earlier. Both posted the largest gains recorded in two years.
The data is according to a new Redfin report, which analyzed county home purchase records across 39 of the most populous metro areas in the US. The report defines investor purchases as residential real estate purchases made by an institution, a business, or a mom-and-pop investor.
Of all home types, investors bought up single-family homes the most. Single-family homes accounted for 69.4% of investor purchases, marking a 6.7% increase year-over-year. Condominium units and co-ops represented 19.4% of all investor purchases in the same period, townhouses made up 6.5%, and multifamily properties represented 4.7%.
Furthermore, investors also bought 24.1% of all affordable homes sold in the second quarter, up from 22.7% in the same period in 2023.
Why Are Investor Purchases Increasing?
The recent uptick in investor activity comes as the soaring home prices are pushing more buyers to the sidelines, leading to an increased demand for rental properties.
"One reason real estate investors are coming out of hibernation is to take advantage of robust demand from renters," Redfin Senior Economist Sheharyar Bokhari said in a statement.
"Elevated home prices and mortgage rates have pushed homeownership out of reach for a lot of Americans, which is fueling demand for rentals. Investors, many of whom can afford to pay in cash to avoid the sting of high mortgage rates, are cashing in on that demand."
As of June, the median sale price of a home in the US was $442,451. However, the price could go up depending on the area. In San Jose, California, for instance, the median single-family existing home price is over $2 million.
Meanwhile, the median asking rent price for a studio or one-bedroom apartment fell to $1,498 a month in June. Rents for two-bedroom apartments and units with three bedrooms or more also fell to $1,730 and $2,010 a month, respectively.
