For the first time in two years, there has been an increase in investor home purchases. This has implications for buyers.

• According to Redfin, the percentage of real estate investor activity increased by 0.5% compared to the previous year.
• It's first increase in activity since mid-2022.
• Here's what that growth means for consumer buyers on the market.

While some consumers attribute high housing prices to private equity activity when buying homes, experts argue that the housing market has several problems and it is difficult to establish if real estate investor activity is actually preventing people from becoming homeowners nationwide.

In the first quarter of 2024, real estate investors bought approximately 44,000 U.S. homes, marking a 0.5% increase from the previous year, as reported by Redfin, a real estate brokerage platform. This represents the first rise since the second quarter of 2022.

Without intending to reside in the properties they purchase, individuals or organizations track their investment activity through data.

The choice between selling your home or renting it out is a complex one.

What an investor home purchase means

According to Redfin, any institution or business that buys residential real estate is considered an investor. These investors typically purchase homes through a limited liability company, trust, or another form of company, with the intention of generating income or a profit. Some investors use the property as a part-time residence or vacation home.

According to Chen Zhao, senior economist at Redfin, it implies that the person purchasing a home is not intending to make it their primary residence.

Zhao stated that the investor share represents the percentage of homes bought by investors during a specific time frame.

According to Redfin, the percentage of homes purchased by investors in the first quarter of 2024 was 19%.

According to Zhao, our measurement indicates that approximately 81% of homes are being purchased by individuals who are not investors, suggesting that they are likely using these homes as their primary residence.

According to a study by ResiClub, which used data from Parcl Labs, institutional operators, or real estate investors owning at least 1,000 single-family homes, account for approximately 1% of the total housing stock in the U.S.

Gauging investor effect 'is complicated'

Moody's Analytics examined the correlation between the percentage of investors in sales and homeownership rates on a metro level in a recent report.

Matthew Walsh, assistant director and economist at Moody's Analytics, stated that the relationship between the two appears to be relatively weak.

He stated that there is limited evidence indicating that crowding out homebuyers from the market is occurring.

"These investors aren't significantly impacting the housing market and allowing traditional family buyers to own their homes," he stated.

Moody's found that investors bought existing homes at high rates in some areas, representing up to roughly one third of purchases. However, this does not necessarily mean that consumer homebuyers are being crowded out, according to Moody's analysts.

Redfin's Zhao stated that it is difficult to determine the extent of the "crowding out" effect on the market.

Zhao stated that answering that question is extremely complex and cannot be done by merely examining straightforward data.

The surge in real estate investor activity can be attributed to seasonality, with more homes being sold in the spring, according to Walsh.

At the beginning of 2024, mortgage interest rates were lower before increasing in April, according to him.

In 2022, the housing market reached its peak, with high home sales until the halfway point of the year. However, sales began to decline as mortgage rates increased, affecting both typical homebuyers and investors, according to Walsh.

What investor interest means for buyers and renters

Zhao explained that as a consumer buying on the market, you are competing not only with other typical homebuyers but also with investors.

"It's more complex when considering how investors handle those homes," she stated.

Renting single-family homes is a common practice among investors. Although it may not be beneficial for potential homebuyers, it positively impacts the rental market by increasing the supply of rental properties, according to Zhao.

Having additional supply of bigger rentals is crucial for people searching for them, she stated.

Some investors purchase uninhabitable properties, renovate them, and then reintroduce them to the housing market, which positively impacts the housing market, she stated.

Zhao stated that it's a complex argument to consider how investor activity affects the housing market.