Investor activity in the U.S. housing market increased significantly in the second quarter of 2024. Purchases rose 3.4% year over year – the largest increase since mid-2022, according to a new report from real estate brokerage Redfin. Investors bought approximately one in six homes sold in the quarter, representing $43 billion in transaction volume and a 13.7% year over year increase.
This rebound follows a period of fluctuating investor activity during the COVID-19 pandemic, which saw purchases more than double during the homeownership boom in 2021, only to fall nearly 50% in 2023 due to falling rents and home values.
“Real estate investors are returning to the market to capitalize on strong demand for rental housing,” said Sheharyar Bokhari, senior economist at Redfin. “High housing prices and mortgage rates have made home ownership unaffordable for many Americans, fueling demand for rental housing. Investors, who often pay cash, are well positioned to capitalize on this trend.”
Strong tenant demand, but sluggish rental growth
While demand for rental properties remains robust, rent growth has been dampened by a wave of new construction during the pandemic. However, as the pace of new construction slows, rents could rebound in the coming years, potentially attracting more investors to the market.
Despite renewed investor interest, overall home purchases in the U.S. fell 1.9 percent in the second quarter as many potential buyers were deterred by rising mortgage rates and home prices. Investors were less affected, however, as 69 percent of them paid with cash.
Regional differences: San Jose and Las Vegas lead, Fort Lauderdale lags behind
Investor purchases rose significantly in certain markets. San Jose, California, and Las Vegas, Nevada, each saw a 27% year-over-year increase—the highest among the metropolitan areas analyzed by Redfin. San Francisco and other California cities also saw notable gains, reflecting a broader recovery in the Bay Area real estate market after a pandemic-related slowdown.
In contrast, the decline in investor purchases was most pronounced in Fort Lauderdale, Florida, down nearly 16 percent. High insurance premiums and property taxes in the region were cited as factors that discouraged investment.
Single-family homes drive investor activity
The increase in investor activity was largely due to purchases of single-family homes, which rose 6.7% year over year. Single-family homes accounted for nearly 70% of all investor purchases in the second quarter, the highest percentage since mid-2022. In contrast, investor purchases of multifamily homes, condominiums and townhomes saw a decline.
Investors also remained strong in the less expensive home market, purchasing 24.1% of the least expensive homes sold during the quarter. These properties accounted for 45.2% of all investor purchases, underscoring a trend where investors are increasingly focusing on the affordable home segment.
Outlook: Investors look for opportunities in the wake of market changes
As the real estate market continues to adjust to post-pandemic realities, investor activity appears to be stabilizing at pre-pandemic levels. Continued demand for rental properties and the potential for rent increases as new construction slows could keep investors in the market.
“In San Jose, there are a lot of foreign investors buying without seeing the property and a lot of real estate speculators looking for a quick profit,” says Craig Pellegrini, a Redfin Premier real estate agent in the area. “There is also a trend of parents buying second homes to rent out before passing them on to their children.”
In contrast, markets like Fort Lauderdale face challenges due to rising costs, which could continue to dampen investor interest in these areas.
As the year progresses, the housing market is likely to continue to see different regional trends. Investor activity will be influenced by the local economic situation, rental demand and general market changes.
Click here to view the full report with charts, methodology and additional metropolitan-level data.
