Even as the overall housing market slowed at the end of 2022, investors were still scooping up a near record-high share of homes for sale, according to a report released Monday by Realtor.com.
In December 2022, investors purchased 8.2% of all for sale homes, down from an all-time high of 8.9% set in February 2022, but still above pre-pandemic levels. The December 2022 share was up 0.4 percentage points year over year, and it was the highest share of investor purchases recorded in the month of December, according the Realtor.com.
The report is based on the analysis of deed recordings from January 2000 to December 2022, both nationwide and in 263 metro areas, which had more than 100 investor sales for the year ending in December 2022. The report only examined single-family, condo and townhouse properties, and did not include any data on multi-family properties.
While the share of investors remains elevated, investor activity has been on a similar trajectory in the broader market. After dropping in early 2020 due to restrictions and uncertainty caused by the COVID-19 pandemic, investor activity rose 52.9% year over year in 2021. As interest rates rose and the housing market cooled in the second half of 2022, investor activity slowed, with the count of investor purchases falling 35.4% year over year in December 2022.
However, while both investor and non-investor purchase activity cooled in 2022, non-investor sales dropped off earlier than investor sales, with annual decreases starting in March 2022 for non-investors and September 2022 for investors. This resulted in non-investor purchases falling 16.6% year over year, while investor purchases still rose 6.4% compared to 2021.
In addition, as the housing market became less competitive in 2022, the share of investors purchasing homes with all-cash dropped to 68.9%, compared to 72.3% in 2021.
Traditionally, small investors (who own 10 or fewer homes) consistently purchase the largest share of homes, but growth activity from larger investors outpaced smaller investors in 2021 and during the first half of 2022. From July 2020 to June 2022, larger investors grew their share of investment purchases from 16.7% to 31.8%. The report attributes this to the early pandemic housing market boom.
But, as home prices and interest rates rose and rent growth cooled in the second half of 2022, large investors pulled back, with their share of investor purchases dropping to 13.3% in December 2022. During the same time, the small investor purchase share rose from a low of 52.6% in October 2021 to 72.8% in December 2022, up 17.7 percentage points year over year.
Although cooling rent growth has increased the incentive for investors to sell their properties instead of renting them out, home buyers are still more likely to compete with investors than sellers. In December 2022, 2,800 more homes were bought by investors than sold by investors, down from a 13,000-home gap in June 2020.
“With mortgage rates rising and rent growth slowing, many investors, especially larger ones, pulled back last year from the feverish rate in which they bought and sold homes during the early pandemic boom years, enabling smaller investors and buyers to better compete,” Hannah Jones, Realtor.com’s research and data analyst, said in a statement. “Despite easing back, investor activity still remained high in 2022, especially in more affordable markets in the South and Midwest.”
In the South, the average investor market share was 12.2% in 2022, up 2.5 percentage points from the year prior, while in the Midwest, investor market share was 9.3% in 2022, up 1.7 percentage points from 2021. The West (6.8%) and the Northeast (6.1%) both recorded a 1.6 percentage point annual increase in investor share in 2022.
When broken down by metro area, Memphis, Tennessee recorded the greatest growth in investor interest in 2022, with nearly 25% of homes sold in 2022 being purchased by investors. St. Louis, Missouri (21.1%); Indianapolis, Indiana (19.2%); Birmingham, Alabama (17.7%) and Kansas City, Missouri (17.0%) rounded out the top five metros seeing the most investor activity in 2022.