Single-Family Rental Investors Purchasing Fewer Houses

Single-family house for rent in Virginia.

Redfin, Seattle, reported single-family rental real estate investors purchased fewer houses in the first quarter than in prior quarters.

Redfin reported investors purchased 11.5 percent fewer houses in early 2022 than during fourth-quarter 2021 and 16.5 percent fewer homes than in third-quarter 2021.

But investor purchases remained above pre-pandemic levels and investors bought up a larger share of America’s homes than ever before, Redfin said. A decrease in overall home purchases nationwide allowed investors to increase their market share even while purchasing fewer homes.

“Investor home purchases are falling for the same reason overall home purchases are falling: surging interest rates and high housing prices have made it more expensive to get a mortgage and buy a home,” said Sheharyar Bokhari, Senior Economist with Redfin. “While roughly three-quarters of investor purchases are made with cash, investors are still impacted by interest rates because they often take out loans to get that cash.”

Bokhari said the fact that investors are still able to grow their market share while buying fewer homes signals they are not feeling the pain of higher interest rates as intensely as individual buyers. “It also indicates that the individuals who can still afford to buy will continue to face competition from investors,” he said.

The drop in investor purchases over the last two quarters may indicate investor purchases are past their peak and returning to normal, Redfin noted. Until year-end 2021, investor purchases had been climbing steadily since the pandemic began, defying normal seasonality. Meanwhile, non-investor home purchases rose and fell in typical seasonal fashion. “Now it seems investor activity is getting back on track with the market as a whole,” the report said. Though investor purchases slowed, they remain above pre-pandemic levels, in part because investors can rent out the homes they buy to cash in on soaring rents, Redfin reported in a separate report. “Demand for rentals is high because there aren’t enough homes for sale, and the ones that are for sale are often prohibitively expensive,” the firm said.