Investor purchases of U.S. homes fell a record 45.8% year-over-year in the fourth quarter of 2022, as the high cost of borrowing money and the prospect of substantial home-price declines made real estate investing less attractive. This is according to a report from Redfin, a technology-powered real estate brokerage.[0] In 2008, the second largest decrease was seen in investor purchases, with a drop of 45.1% due to the subprime mortgage crisis.
Due to the quick rise in mortgage rates, which reduced housing affordability to a historic low, homebuying demand slowed and the peak-to-trough in home values last year was a direct result. The Federal Reserve’s attempt to control inflation caused mortgage rates to go up, which made it costlier to buy a home and so decreased demand from homebuyers.
At the end of 2022, U.S. homes had a total value of $45.3 trillion, a decrease of 4.9% ($2.3 trillion) from the June record of $47.7 trillion, as reported by Redfin in a new study.[1] This is the greatest percentage decline between June and December since 2008.[2]
Investor purchases in Las Vegas experienced the steepest decline, decreasing by 67% compared to the same period last year.[3] Nassau County in New York was the runner-up, with Phoenix coming in close behind.[4] Mountain West cities which saw some of the largest influxes of new residents and subsequent investor interest in 2020 and 2021 are now experiencing the largest declines in purchases.[5]
Signs in the fourth quarter indicated that Opportunity Zone markets were faring better than other neighborhoods during the national market retreat, similar to how they had outperformed nationwide increases in the boom period.[6] Roughly one-third (31.2%) of home purchases were paid for with all cash in December, according to a new report from Redfin.[7] The current figure is 28.8% higher than the same time the year before, but lower than the peak of 31.9% in November, the highest rate[8]
San Francisco has seen some of the greatest decreases in value compared to other expensive coastal cities, which it was once famously known for.[9] In December, the collective value of the housing market in that area decreased 6.7%, or $37.3 billion, from the previous year, bringing it to $517.5 billion. This was the biggest decrease in percentage terms compared to any other major U.S. metropolitan area, according to Redfin.[10]
0. “Investor Purchases of U.S. Homes Fall a Record 45.8%” Realty Plus Magazine, 23 Feb. 2023, https://www.rprealtyplus.com/international/investor-purchases-of-us-homes-fall-a-record-458-109668.html
1. “Real estate: US homeowners have lost $2.3 trillion since June: Redfin data” AOL, 22 Feb. 2023, https://www.aol.com/real-estate-us-homeowners-lost-194008617.html
2. “Redfin: $2.3T In Home Values Lost In 2nd Half Of ’22” National Mortgage Professional, 22 Feb. 2023, https://nationalmortgageprofessional.com/news/redfin-23t-home-values-lost-2nd-half-22
3. “Biggest Pullback in Investor Home Purchases Since the Mortgage Crisis of 2008” Builder Magazine, 16 Feb. 2023, https://www.builderonline.com/data-analysis/biggest-pullback-in-investor-home-purchases-since-the-mortgage-crisis-of-2008_o
4. “Investors Purchases of Single-Family Homes Drops By Almost Half” Route Fifty, 17 Feb. 2023, https://www.route-fifty.com/infrastructure/2023/02/investors-purchases-single-family-homes-drops-almost-half/383128/
5. “Investor purchases fell by record amounts at end of 2022” National Mortgage News, 15 Feb. 2023, https://www.nationalmortgagenews.com/news/investor-purchases-fell-by-record-amounts-at-end-of-2022
6. “ATTOM Report Uncovers Continued Strength of Opportunity Zone Markets” Mortgageorb, 16 Feb. 2023, https://mortgageorb.com/attom-report-uncovers-continued-strength-of-opportunity-zone-markets
7. “10 U.S. Cities With the Highest Share of All-Cash Home Sales” msnNOW, 17 Feb. 2023, https://www.msn.com/en-us/money/realestate/10-u-s-cities-with-the-highest-share-of-all-cash-home-sales/ar-AA17CXFl
8. “Redfin Reports Share of Homes Bought With Cash Ticks Down From November Peak” Business Wire, 15 Feb. 2023, https://www.businesswire.com/news/home/20230215005284/en/Redfin-Reports-Share-of-Homes-Bought-With-Cash-Ticks-Down-From-November-Peak
9. “U.S. Homeowners Have Collectively Lost $2.3 Trillion in Property Value Since the Summer” Mansion Global, 22 Feb. 2023, https://www.mansionglobal.com/articles/u-s-homeowners-have-collectively-lost-2-3-trillion-in-property-value-since-the-summer-81f3ab46
10. “U.S. home values slump by $2.3T since June peak, Redfin says (NASDAQ:RDFN)” Seeking Alpha, 22 Feb. 2023, https://seekingalpha.com/news/3939136-us-home-values-slump-by-23t-since-june-peak-redfin-says