Housing market looking less attractive to investors
But there is still competition for homes, especially at lower price points, where first-time buyers cross paths with buyers on the investment side.
Stubbornly elevated mortgage rates and home prices appear to be dampening investor enthusiasm for residential real estate.
A new report from CoreLogic found that while investor activity increased between the second and third quarter, their market share remained below last year — 25% vs 28%. The firm estimates that investor market share will stay put "for the foreseeable future" unless mortgage rates drop.
"As the total number of purchases continues to slide, interest rates remain elevated, housing prices are high, and economic conditions are in flux," said Thomas Malone, author of the report.
"Faced with these headwinds, it is not clear what may draw investors back into the market at previous levels."
Investors rushed in when rates were low: The higher share of investors is a trend that started around four years ago, when mortgage rates were at ultra low levels. Prior to the pandemic the investor market share was under 20%; the five-year peak was nearly 30% in January 2024.
While a slowdown in investor purchases would be good news for those looking to buy their own home, there is still plenty of competition at the lower price tiers, according to the report.
"This tier is also where many buyers with limited means, like first-time homebuyers, are looking to purchase homes. As a result, the large investor presence in these tiers means increased competition for buyers," Malone said.
"Mom-and-pop" investors make a major impact: The report noted the importance of smaller investors with between 3 and 10 units, saying that this "mom-and-pop" group makes up 60% of investor purchases.
"Smaller-scale investors play a powerful but understated role in the market, buoying home prices even as overall demand has softened," Malone said.
Large (100-1,000 properties) and mega (more than 1,000 properties) investors remain a very small share of the overall investor market share. Mega investors represent less than 5% market share in the top 20 major metro areas.
As an example, Los Angeles has the highest total investor share in the U.S., with 42% of purchases coming from an investor. In 2024 only 2% came from mega investors.
Atlanta had the next highest share of investors transactions in 2024 at around 35%, followed by Riverside, California and Las Vegas. At just over 20% investor market share, Minneapolis had the lowest share among the 20 largest metro areas.