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n the second quarter, investor purchases of U.S. homes plummeted to their lowest springtime level since 2020, with a decline of 6% from the previous year. This drop was particularly pronounced for condos, which saw a 13% year-over-year decrease in investor activity. Despite this decline, investor market share remained steady at around 17%, indicating that investors are still active in the market but being more selective.
The typical investor earned $195,934 in capital gains from selling a home in the second quarter, up 1.7% year over year. However, profit growth is shrinking, and many investors are now facing losses on their sales. Just under 7% of homes sold by investors in the second quarter resulted in a loss, up from 5% a year earlier.
Investors are being deterred by high borrowing costs, elevated home prices, and economic uncertainty. Even though most investors pay cash for properties, they often take out loans to fund renovations or other expenses, which has become more expensive due to higher interest rates. Additionally, home prices remain near record highs, making it less attractive for investors to buy and sell properties.
The condo market is particularly challenging, with high HOA fees, special assessments, and rising costs of insurance and maintenance. Many investors are shying away from condos due to concerns about their value decreasing in the future. "The condo market is the slowest I've seen in at least a decade," said John Tomlinson, a Redfin Premier agent in Fort Lauderdale.
Investors purchased nearly 1 in 5 homes sold in the second quarter, with a flat market share from a year ago. However, investor purchases fell significantly in Florida, particularly in Orlando, where they declined by 25% year over year. On the other hand, investor activity increased on the West Coast, led by Seattle, where it rose by 51% year over year.
The decline in investor activity mirrors the overall slowdown in homebuying activity, with investors being more choosy about their purchases. "For real estate investors, the numbers just don't pencil out the way they did a few years ago," said Redfin Senior Economist Sheharyar Bokhari.
