Home sales have been declining, but now it appears that investors are retreating even more than traditional buyers.
- For the past nine months, home sales have declined due to high mortgage rates.
- Investors now appear to be bailing as well as investor purchases drop 30%.
- Reports from real-estate firm Redfin found that investor purchases saw their largest drop since the Great Recession in 2008 and 2009.
- The drop in investor purchases is more significant than the drop in overall home purchases which fell 27%.
- Investor buyers, usually part of a large fund, differ from traditional home buyers in that they are purchasing a home in order to later sell, develop, or rent it to make a profit.
Why it’s news
Investors falling back may mean good news for homebuyers as they no longer need to compete with the cash-rich investors.
“It’s unlikely that investors will return to the market in a big way anytime soon. Home prices would need to fall significantly for that to happen. This means that regular buyers who are still in the market are no longer facing fierce competition from hordes of cash-rich investors like they were last year,” says Redfin economist Sheharyar Bokhari.
Investors with cash were not likely to be deterred by the higher mortgage rates. However, the continuing high prices of homes are scaring some investors off.
Home prices remain higher than last year, though they are not rising as quickly as before.
A recent report from the Case-Shiller National Home Price Index finds that between June and August home prices fell 1.3%—marking the first decline since 2012.
The decline in prices isn’t equal across the U.S. Some markets are seeing an imperceptible .01% decrease while others are experiencing a significant 8.24% drop, Fortune reports.