BAM Key Details:

  • A new Redfin report for Q2 2023 shows investor home purchases falling 45% year over year—the biggest annual drop since 2008 with the exception of the previous quarter with its 48% annual decline. 
  • The same factors influencing buyer demand—rising home prices, high mortgage rates, and low inventory—have taken a heavier toll on investors looking to flip homes or gain rental income, but those still selling are seeing decent returns. 

In the second quarter of 2023, real estate investors purchased 45% fewer homes compared to one year earlier—well above the 31% overall decline in home sales. 

According to a new report from Redfin, that’s the biggest annual drop in investor home purchases since 2008, with the exception of quarter one’s 48% decline. 


Source: Redfin

This year’s challenging market, with its rising home prices, high mortgage rates, and record-low inventory, has taken an even heavier toll on investors since they purchase with the intention of flipping homes for a profit or earning rental income. The relative cooling in both housing and rental markets has made both options less attractive than they were during the buying frenzy of 2021 and early 2022. 

Investor home purchases for Q2 2023 totaled roughly 50,000 homes—falling below pre-pandemic levels to the lowest number of any second quarter in seven years, with the exception of the start of the pandemic. 

Data for Redfin’s report covers 39 of the most populous U.S. metro areas. 

Offers from hedge funds have dried up; I haven’t received an offer from one in a long time, except unrealistically low offers. From mid-2020 until early 2022 when interest rates started going up, hedge funds bought up a ton of properties and immediately turned them into rentals, pricing out local buyers. Now a big portion of our homes are owned by investors, but they’re not adding to their portfolios.

Shay Stein

Las Vegas Redfin Premier agent

Investor market share fell to 18%

With investors backing away from the market faster than home buyers, investor market share dropped to 18% in the second quarter. 


Source: Redfin

Even all-cash property investors are feeling the impact of higher mortgage rates since many use other types of loans to cover expenses involved in repairs and renovations. And because homes at lower price points make up the largest share of investor purchases, the need for repairs and renovations are likely greater than otherwise—especially with inventory at historically low levels.

About seven in 10 inventors (71%) made all-cash purchases in Q2 2023—down from 75% in Q2 2022. 

Moving forward, the investors who do come back may be more focused on scooping up rental properties than flipping homes. All signs point to the rental market remaining relatively strong. Home prices and mortgage rates are high enough to motivate would-be first-time homebuyers to continue renting. The typical U.S. asking rent remains quite high, just $16 shy of its all-time high, so investors who are landlords stand to earn money. Investor purchases of rental properties could be limited by some of them building new properties to rent out, though.

Home flippers may be slower to come back. That’s mainly because mortgage rates are unlikely to decline significantly in the short term, which will keep homebuying demand relatively low and discourage flippers. Plus, investors have lower-risk places to park their money right now than real estate, with high yields in the bond market.

Sheharyar Bokhari

Redfin Senior Economist

Even if investor market share ticks back up in coming quarters, their purchase volume will likely remain low due to limited inventory and homeowners locked into lower mortgage rates. 

Investor share of new listings is down, but those selling are seeing big returns

In March, 2023 (the most recent month for which this data is available), investors owned 8% of new listings—slightly less than 9% from a year earlier and down from a peak of 13% at the end of 2021. Compared to a year ago, investors listed 36% fewer homes, while new listings as a whole declined by 24%. 

That said, most investors who are still flipping homes are seeing substantial gains. The typical home flipper in June sold their home for 61% ($188,448) over the initial purchase price. That’s down from a 69% ($199,946) premium in June of 2022 but still a healthy return.  

For reference, a “flipper” is an investor who sells a home within nine months of buying it. 

Only 3% of homes flipped in June sold for less than the purchase price—down from a peak of 29% in September of 2022 and roughly equivalent to 4% one year ago. 

Low-priced homes make up the largest share of investor home purchases

While investors are buying fewer properties compared to a year ago, they’re still favoring homes at lower price points. Investors purchased 23% of the low-priced homes sold in Q2 2023—down from 25% one year ago but still significantly higher than for more expensive homes. 

Compare that to 11% of mid-priced homes (down from 19% a year ago) and 14% of high-priced homes (down from 16% a year ago). 


Source: Redfin

While low-priced homes often come with a need for repairs and renovations, they still draw investors because, while mortgage rates remain high, the additional monthly cost of financing a home subtracts from any gains flippers can make. For those intending to rent out their investment properties, those higher monthly payments mean they’ll have to charge higher rents to cover their own costs. 

Small homes—i.e., homes with 1,400 square feet or less—accounted for 39.2% of investor purchases in Q2 2023, which is the highest share of any Q2 on record and just slightly below the record high of 40.6% set in the previous quarter (Q1 2023). 

Forty-six percent of investor purchases in Q2 were low-priced homes, up from 39% one year ago. High-priced homes accounted for 31% of investor purchases, up from 29% in Q2 2022. 


Source: Redfin

Nearly 7 in 10 investor purchases are single-family homes

Sixty-eight percent of investor purchases in the second quarter were single-family homes—down from 73% in Q2 2022. A key reason for the drop in that share is the shortage of single-family homes for sale.

Condos made up the second largest share at 20% of investor purchases—up from 16% one year ago and the highest since 2018. Next in line are townhomes at 7% and multifamily properties at 5%. 

Speaking of market share, though, investors have the highest with multi-family properties; in the second quarter, they purchased 31% of the multi-family properties that sold—just slightly under the 32% from a year ago. Investor market share for this real estate category is relatively high mainly because these buildings are expensive and typically used as rental properties.

Compare that to investor market share for single-family homes, which was 15% in the second quarter, down from 20% a year ago. Also, on par with Q2 2022, investors purchased about one of every six condos and townhomes that sold. 

Read the full report for more details. 

Takeaways for real estate agents

While higher mortgage rates have sidelined many investors and individual homebuyers, not all have backed away from the market. And if mortgage rates continue to tumble, competition is likely to heat up. This is good news for your seller clients. 

For your buyer clients, depending on what’s available and what they can reasonably afford, their window of opportunity to get the home they want is still open but may be closing soon as more buyers, encouraged by the decline in rates, re-enter the market. 

Keep yourself up to date on the latest housing market news by tuning in for the Hot Sheet every weekday the markets are open.