Investors Are Back, Buying 26% Of America’s Most Affordable Homes

With mortgage rates beginning to moderate, investors are back and snapping up the most wanted homes on the market.

Investors bought 26% of America’s lowest-priced homes in Q4 2023, according to a new report from Redfin, a record-high share and up from 24% at the same time last year.

By comparison, they bought 13.6% of mid-priced homes that sold and 15.9% of high-priced homes, both increases.

Investors are more choosey now than they have been in recent memory, looking for lower-cost homes they can rent or flip for better profits.

“I get tons of emails every day from investors looking for properties, but of course, they only want homes that are under market value, which are hard to come by. When they find those properties, they pile in,” Carrie Caruthers, a Redfin Premier real estate agent, said.

She noted that a recent increase in foreclosures has piqued investor interest because they typically sell for cheaper.

“I just sold one foreclosed house to an investor for $400,000. It probably would’ve sold for around $500,000 if it hadn’t been a foreclosure, but the investor got a deal because foreclosure purchases come with risks.”

Foreclosures jumped by 10% in January, partly due to seasonal slowdowns in the legal system post-holidays. But ongoing economic pressures are a concern as well. ATTOM Data Solutions called the jump a “notable increase.”

“[E]xternal factors may be at play such as escalating interest rates, inflation, employment shifts and other market dynamics. We remain vigilant in monitoring these trends to understand their full impact on foreclosure activity,” ATTOM CEO Rob Barber wrote.

Overall investor purchases are down YOY by 11%, but this is the smallest annual decline since they began falling in 2022.

Investors caused real headaches for buyers in 2021 when rates were super low. In metro Atlanta between July 2021 and June 2022, for example, one in three homes was sold to an investor.

“At one point in my life, I was a first-time homebuyer, so I’ve had a lot of sympathy for a lot of these first-time homebuyers that were being completely shut down by investors coming in and paying cash. And we had big investors,” Cory Ure of SecurityNational Mortgage Company in Salt Lake City told The Mortgage Note.

“They’d go to a builder and say, ‘We’ll buy 10 homes right in a row from you.’ Even some very qualified buyers couldn’t compete against these investors, especially these big pension funds and hedge funds coming in and paying way over value.”

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