Redfin: Investors Bought Bigger Share of Affordable Homes in Late 2023

(Chart courtesy of Redfin)

Real estate investors bought just over 26% of the low-priced homes that sold in the fourth quarter–the highest share on record, according to Redfin, Seattle.

The figure increased from 24% a year earlier.

By comparison, investors purchased 13.6% of mid-priced homes (vs 14.3% a year earlier) and 15.9% of high-priced homes (vs 15.4% a year earlier), Redfin reported.

“Investors are drawn to affordable homes for the same reason as other homebuyers: they cost less, which is especially attractive when home prices and borrowing costs remain elevated,” the report said. “And when housing affordability is this strained, there could be more potential for value increases in the lower-price tier, meaning more potential for building equity.”

For its analysis, Redfin divided home purchases into three buckets: low-priced, mid-priced and high-priced. Low-priced homes are those that fall into the bottom tercile of local sale prices, while mid-priced are those in the middle tercile and high-priced are those in the top tercile.

Low-priced homes made up 46.5% of all investor purchases in the fourth quarter (vs 47.2% a year earlier), while mid-priced homes made up 24.6% (vs 26.4% a year earlier) and high-priced homes represented 28.8% (vs 26.5% a year earlier).

Overall Investor Home Purchases Dropped 11% in Fourth Quarter

Investor purchases of U.S. homes fell 10.5% year-over-year in the fourth quarter to 46,419–the lowest fourth-quarter level since 2016, Redfin said. Overall U.S. home purchases posted a slightly larger decline, falling 12.2% to 251,462–the lowest fourth-quarter level since 2012.

“Investor home purchases have fallen in part because high interest rates, elevated home prices and a sluggish rental market have made investing less lucrative,” the report said. “Some investors have shifted their money into other investments that offer good returns and lower risk, such as Treasury bonds.”

The typical home purchased by investors in the fourth quarter cost $453,271, up slightly from $426,573 a year earlier, as U.S. home prices ticked up, Redfin said. Overall, investors bought $32.3 billion worth of U.S. homes, down just slightly from $33.6 billion a year earlier.