M
ortgage rates have remained high despite recent rate cuts, drawing in cash-rich investors to the housing market. Despite some areas experiencing declining home values, sellers are still reaping significant profits. Cities like San Jose and Denver are attracting investor interest, while Oakland and Providence have seen a decline.

    The central bank's interest rate cuts haven't translated to lower mortgage rates, with the average 30-year term hovering around 6.21%. However, there was an increase in buyers during the second quarter, particularly investors, according to Redfin data. The share of investor purchases rose 3.4% from a year earlier, likely driven by the opportunity to meet growing demand from renters facing affordability barriers.

    Home prices nationwide increased by 4.3% in July compared to last year, with distressed sales included. Investors purchased one out of every six properties sold during the second quarter and one out of every four low-priced homes, accounting for $43 billion worth of real estate. Most investors (69%) pay in cash or make larger down payments, making them less reliant on debt and more resistant to rate changes.

    Cities like San Jose, Portland, and Denver have seen a rise in investor interest, while areas like Oakland and Providence have experienced a decline in purchases. Despite this, investors are still generating significant capital gains, with some cities experiencing price increases of 30-40% over the past year.

    According to Redfin's senior economist Elijah de la Campa, even cities with declining capital gains are still profitable at sale, although not as much as they would have been a year ago. Many affordable areas, such as Philadelphia and Warren, MI, are experiencing high capital gains, making them attractive to investors.