R
eal estate investors are scaling back their involvement in the US housing market due to high borrowing costs, slowing demand, and economic uncertainty. According to Redfin, investor purchases of homes dropped 3.9% year-over-year in Q4 2024, reaching a four-year low, with 47,004 homes sold - the lowest total since 2016.

    Investors are hesitant to buy due to rising home prices, stagnant rental market conditions, and concerns over the broader economy. Despite this slowdown, investors still accounted for 17.1% of all US home sales in Q4, down from 19% a year earlier. The housing market as a whole is struggling with high mortgage rates and affordability challenges.

    Investors are no longer seeing the same rate of return they did two or three years ago, according to Redfin agents. Some investors worry about selling at a loss if market conditions worsen. Home-price appreciation has slowed, making house flipping and rental investments less lucrative. Rents have plateaued due to increased apartment construction.

    Elevated mortgage rates remain a challenge for investors, even though most purchases are made in cash. Many investors still rely on financing for property flips and other costs, which is now more expensive. Condo investments were hit hardest, with a 13% year-over-year decline, driven by rising HOA fees, climate risks, and insurance costs.

    Investor purchases of single-family homes fell 1.6%, while townhouse purchases dropped 6.1%. Multifamily purchases increased by 2.9%, indicating a shift toward rental-focused investments. Purchases of low-priced homes remained steady, but investor market share declined across all price tiers.

    Investors are favoring cheaper properties due to affordability and ease of renting out. However, even in the affordable segment, investor market share has decreased. The pullback in investor activity extends beyond direct real estate purchases, with homebuilder stocks also experiencing a decline in confidence. Home construction sector stocks have plunged 24% since President Trump's election victory, and US housing starts declined in January.