House hunting in the resale market remains impacted by a lack of new sellers, a low inventory of homes for sale, and a continued elevated rate of investor purchases of for-sale homes.
According to a recent analysis by Realtor.com, investors purchased 8.2% of homes sold during December 2022, up 0.4 percentage points from the same time in 2021.
The investor buyer share has lost some ground since peaking at 8.9% as recently as February 2022, but it remains well above pre-pandemic and pandemic-era levels. Early in the pandemic, investors pulled back more than other buyers and saw their share of the market shrink to as low as 4.3% in April 2020. Since reaching its trough, investor purchases have steadily increased the past two years and remained above 8% for the entirety of 2022.
“With mortgage rates rising and rent growth slowing, many investors, especially larger ones, pulled back last year from the feverish rate that they bought and sold homes during the early pandemic boom years, enabling smaller investors and buyers to better compete,” says Realtor.com research data analyst Hannah Jones. “Despite easing back, activity remained high in 2022, especially in more affordable markets in the South and Midwest.”
The share of all-cash investor purchases softened in 2022 from the high levels in 2021. In 2022, 68.9% of investors paid in cash, lower than the 72.3% of investors in 2021 who purchased in all cash. On a monthly basis, the share of all-cash investor buyers fell to 66.7% in December 2022, the lowest share since May 2008. According to Realtor.com, investor purchasing shifted toward small investors in 2022’s second half. The larger share of small investors, a cohort more likely to use a mortgage, contributed to the lower share of all-cash purchases by investors in 2022.
In 2021 and 2022, roughly 85% of large investors—those who purchased 50 or more homes—bought properties with cash, while around 67% of small investors—those who purchased 10 homes or less—bought with cash. As home prices and interest rates increased in the latter half of 2022 and rent growth cooled, large investors pulled back from the housing market, falling to just 13.3% of investor purchases in December 2022. Conversely, the small investor purchase share increased from 52.6% in October 2021 to 72.8% in December 2022.
According to Realtor.com, the investor-buyer count outpaced the investor-sale count each month since September 2020 but hit a peak in June 2022, when investors bought roughly 13,000 more homes than they sold. The gap between investor buying and selling fell lower by the end of 2022, with 2,800 more homes bought than sold.
On a regional basis, Southern metros experienced the greatest share of and growth in investor activity in 2022, followed by the Midwest. Realtor.com says the increase in both regions was driven by small investors.
In Memphis, Tennessee, nearly a quarter of homes sold in 2022 were purchased by investors. St. Louis (21.1% investor share of purchases); Indianapolis (19.2%); Birmingham, Alabama (17.7%); and Kansas City, Missouri (17%) rounded out the top five metros seeing the most investor activity. Memphis; Urban Honolulu, Hawaii; Cape Coral-Fort Myers, Florida; Palm Bay-Melbourne-Titusville, Florida; and San Antonio experienced the largest year-over-year increases in investor activity last year, according to Realtor.com.
