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Real estate investors are diving headfirst into the market, snatching up properties at a blistering pace. According to Redfin, investor home purchases surged 3% in the second quarter, with these savvy buyers scooping up one in every six homes on the market. In total, they shelled out a staggering $43 billion — up nearly 14% from last year.
The hot ticket? Single-family homes.
Housing prices are at an all-time high, but that’s not stopping real estate investors from diving in. Earth Pixel LLC. – stock.adobe.com
Investors can’t get enough, with these properties making up 69% of their purchases. But it’s not just the high-end homes they’re after — investors have been zeroing in on the lower end of the market, too, snatching up one in every four low-priced homes.
And what’s their game plan? Many are likely holding onto these homes to cash in on the rental boom.
Rents for single-family homes skyrocketed during the pandemic and, while things have cooled slightly, the market is still sizzling.
Redfin reports a 3% jump in investor home purchases in Q2, snatching up one in six homes for a staggering $43 billion — up nearly 14% from last year. andreykr – stock.adobe.com
CoreLogic’s index revealed a 3.2% year-over-year jump in single-family rents as of May, marking the highest rate of growth since April 2022. This suggests that rent growth might be returning to its pre-pandemic pace.
During the pandemic, investors were out in full force, but a trifecta of sky-high prices, soaring interest rates and tighter financing had sidelined some in recent years.
Investors are targeting single-family homes, especially on the lower end, and cashing in on strong rental demand, with rents rising 3.2% year-over-year in May. SeanPavonePhoto – stock.adobe.com
However, the tide is turning. “One reason real estate investors are coming out of hibernation is to take advantage of robust demand from renters,” explained Redfin Senior Economist Sheharyar Bokhari. He noted that many investors, especially those who can pay in cash, are jumping at the chance to avoid the sting of high mortgage rates while capitalizing on the rental demand.
California’s housing market is a mixed bag these days. Financial guru Robert Kiyosaki recently sounded the alarm, telling Fox Business that California is “going bust.”
But the numbers tell a different story. Investors are flooding the West, with San Jose and Las Vegas leading the charge — investor purchases shot up by 27% in both cities. In Sin City, more than 22% of homes sold were snapped up by investors.
California cities, led by San Jose and San Francisco, are hot markets for these savvy buyers, despite mixed opinions about the state’s future. Pictured above is a San Jose neighborhood. Sundry Photography – stock.adobe.com
California dominated the top five markets for investor growth, with Sacramento, Los Angeles and San Francisco all making the list. Redfin reported that San Jose and San Francisco were also among the top cities where overall home sales surged, with San Jose seeing a 15% increase.
This might ease fears that layoffs from Big Tech would permanently damage these markets.
Low condo sales at massively discounted prices and the current real estate crash happening in San Francisco, previously reported by The Post, have also left investors with deep pockets to take advantage of the dire market.
Meanwhile, Miami leads in investor activity, with 28.5% of homes sold to investors. littleny – stock.adobe.com
Craig Pellegrini, a Redfin agent in San Jose, revealed that about a quarter of the buyers he talks to are a mix of institutional and individual investors.
“There are a lot of folks with tech money who bought homes here in the early 2000s, built a ton of equity, and are now taking on a side hustle as a real estate investor,” Pellegrini said. He added that others are renting in pricy neighborhoods like Mountain View and Los Altos but are buying investment properties in more affordable areas like San Jose to build equity.
Meanwhile, in Florida, the story is mixed. Miami and Fort Lauderdale saw a dip in investor activity, yet Miami still tops the charts as the area with the highest percentage of investor activity — nearly 29% of homes sold were bought by investors.
Profits remain robust, with investors in Philadelphia seeing median gains of 133%. Anjelika Gretskaia – stock.adobe.com
Even in pricey markets like San Francisco, the typical investor raked in $685,000 more than they paid. SeanPavonePhoto – stock.adobe.com
And it’s paying off. Investors are cashing in big, with just 5% selling at a loss.
The typical investor walked away with a profit 58% higher than their original purchase price.
The biggest winners?
Investors in Philadelphia, where median gains hit a whopping 133%. Even in high-priced markets like San Francisco, investors are raking it in, with the typical home selling for $685,000 more than what was originally paid.
