BAM Key Details:

  • According to a new report from Redfin, real estate investors bought 26% of the low-priced U.S. homes that sold in Q4 2023—the highest share on record. 
  • Compared to a year earlier, investors bought a smaller share of the mid-priced homes that sold (13.6% vs 14.3%) and a larger share of high-priced homes (15.9% vs 15.4%).
  • Byron Lazine reviewed the Redfin report on Wednesday’s Hot Sheet (02.14.24).

Real estate investors purchased 26.1% of the most affordable U.S. homes that sold in the fourth quarter of 2023—the highest share on record and up from 24% a year ago. 

That’s according to a new Redfin report. The headline alone will likely create a considerable amount of misinformation on social media, namely in the camp of those who blame investors for reducing the supply of affordable homes for individual homebuyers. 

By affordable homes, we mean those that fall into Redfin’s bottom tercile of homes sold in a given time period. These are the low-priced homes, which are currently in short supply. 

Meanwhile, at other price points… 

  • Investors bought 13.6% of the mid-priced homes that sold in Q4 2023—down from 14.3% a year earlier. 
  • Investors bought 15.9% of the high-priced homes that sold in Q4 2023—up from 15.4% a year earlier. 

Overall, the total number of investor home purchases in the U.S. dropped 10.5% in the fourth quarter of 2023, compared with the year prior. 


Source: Redfin

Byron Lazine reviewed Redfin’s report on Wednesday’s Hot Sheet to highlight the potential for misinformation on social media if people react to Redfin’s headline without taking a closer look. 

There’s one study published by Redfin this morning that is going to create a lot of misinformation. There’ll be misinformation on X (Twitter) and other social media sites—probably as early as this afternoon.

The headline from Redfin is that ‘Investors bought 26% of the country’s most affordable homes in the fourth quarter of 2024—the highest share on record. Investors also bought…about 18% of all homes that sold in the fourth quarter, which is up slightly from a year ago. 

Now I want to define what Redfin is saying is an investor. Because people are going to run to social media sites. And they’re going to say, “Wall Street, the institutional buyer is leaving no homes for everyday Americans—for families to buy. And it’s simply just not true.

Byron Lazine

Watch the full episode here:

What does Redfin mean by “investor” 

Redfin’s report is based on county home purchase records for 39 of the most heavily populated U.S. metros. For this report, they define investors as “any institution or business that purchases residential real estate.”

Redfin expands on this in its report methodology to include “any buyer whose name includes at least one of the following”:

  • LLC
  • Inc.
  • Trust
  • Corp
  • Homes

Have you—I know I have—ever bought a personal home and put it into an LLC—or maybe a rental property? If you own one home, your primary residence, and you decided to get an Airbnb or a rental property to have some cash flow (as all the investors like to say), and you put that into an LLC, LLCs are very commonly used to purchase real estate. Doesn’t mean that Wall Street is buying one out of five homes in the fourth quarter. 

We know that…an institutional buyer is defined by these corporations that are owning over a thousand rental homes. That’s not what this is. That’s in the 1% to 2% of homes across America range. This is your neighbor, your client, your everyday investor who’s going out and buying homes.

Byron Lazine

Redfin also includes in its “investor” category anyone whose ownership code on a purchasing deed includes one or more of the following keywords:

  • Association 
  • Corporate trustee
  • Company 
  • Joint venture
  • Corporate trust 

As mentioned earlier, Redfin divides home purchases into three buckets based on price point: 

  • Low-priced
  • Mid-priced 
  • High-priced 

Obviously, the low-priced ones are where we typically see the most buyer competition, mainly because the supply of these homes falls short of demand. And a large share of new construction projects are for homes priced above the median (i.e., mid-priced and up). 

Investors buy low-priced homes for the same reasons as other homebuyers. They cost less, which increases the potential for resale profit even after the cost of repairs and renovations, especially as home prices continue to rise. 

Low-priced homes are particularly attractive when mortgage rates are high, given the latter’s impact on monthly mortgage payments

For investors who intend to keep and rent out their real estate investments, a lower purchase price means there’s more potential for value increases—which translates into more potential for building equity.

It makes sense. If you’re going to get a rental in your local market, and you can pick one of those up in the lower price tier…you have the ability to get more cash flow. You’re going to have a safer return on investment. With where mortgage rates are…it can be very constrictive to get cash flow on a rental property.

Byron Lazine

In the fourth quarter of 2024, low-priced homes accounted for 46.5% of all investor purchases—down from 47.2% a year earlier. 

Meanwhile, 24.6% of investor purchases were mid-priced homes (down from 26.4% a year earlier) and 28.8% were high-priced homes (up from 26.5% a year earlier). 

Are investors having a negative impact on the housing market for regular buyers?

Now, about the elephant in the room, there’s been quite a bit of noise about the impact investors are having on the U.S. housing market—and on regular homebuyers in particular—by stimulating home price growth and reducing the supply of affordable homes for sale. 

Some lawmakers are even pushing for a law that would limit tax breaks for large corporate investors that purchase homes. 

As Byron pointed out, those large corporate investors, who own around a thousand or more rental properties, only account for 3% of all home purchases across the U.S., according to Moody’s

Redfin also referenced a study that found “no evidence that SFRs crowd out residential home-buyers or increase home prices.” The term SFRs refers to single-family REITs—companies that invest in single-family rental properties. 

Investor home purchases dropped year over year in Q4 2023

The total number of investor home purchases in the U.S. dropped 10.5% year over year in the fourth quarter of 2023 to 46,419—the lowest level for a fourth quarter since 2016. 

The annual decline in overall U.S. home purchases was slightly bigger at 12.2%, bringing total purchases down to 251,462—the lowest level reported for a fourth quarter since 2012. 


Source: Redfin

Investor home purchases have dropped for the same reasons overall home purchases have: 

  • High interest rates
  • Elevated home prices

A sluggish rental market means fewer potential tenants for rental properties, meaning a reduced potential for cash flow. No renters means no return on investment for rental properties. 

Because of that, some investors have shifted their resources into other investments with good returns and less risk, such as Treasury bonds. But, as Redfin reports, agents in California and Florida still see plenty of investor demand for homes. 

Investors and inventory

Total inventory of for-sale homes in the U.S. dropped 5.1% year over year in December 2023, remaining well below pre-pandemic levels as most homeowners chose to stay put to hold onto the low mortgage rates they locked in during the pandemic. 

The typical home purchased by investors in Q4 2023 sold for $453,271—up slightly from $426,573 in Q4 2022 as home prices ticked up across the U.S.

Overall, real estate investors purchased $32.3 billion worth of U.S. homes in Q4 2023—down just a tick from $33.6 billion in Q4 2022. 

Most of the factors behind that drop are the same ones causing regular (i.e., non-investor) homebuyers to back away from the housing market. But those regular homebuyers backed off a little faster in Q4 of last year, likely due to mortgage rates hitting their highest level in 23 years last October, causing a surge in monthly mortgage payments for homebuyers. 

Investors tend to be less sensitive to mortgage rate spikes compared to regular homebuyers, mainly because most investors pay in cash. 

That said, they’re not immune to higher rates since they often need other loans to cover the costs that go with home flipping or getting a home move-in-ready for renters. 

That 10.5% year-over-year decline in investor home purchases in Q4 2023 marks the sixth drop in a row. But it’s still well under the 44.1% year-over-year drop reported a year earlier. And it’s the smallest annual decline since investor purchases started dropping in Q3 2022. 


Source: Redfin

The drop in investor home purchases has slowed since the shock of higher mortgage rates has worn off (to an extent) and the U.S. economy has shown more resilience than many economists expected. 

If there’s a downside to that resilience, it’s what we’re seeing now with mortgage rates as they again climb above 7%

ICYMI: Investors bought close to 1 in 5 of the homes that sold in Q4 2023

That’s a rephrasing of one of Redfin’s subheads—belaboring the point that investors (defined in full at the very bottom of their report) are swallowing up nearly 20% of the homes for sale in this country. 

The actual figure is 18.5% of all the U.S. homes that sold in Q4 2023, including those of all price points. That 18.5% is up slightly from 18.1% in Q4 2022. 

Investor market share probably increased by that slight margin simply because they didn’t back away from the market as quickly as regular* buyers. 

*Redfin uses the term “individual” buyers here, but since individuals can also be investors (see above), we’re using “regular” to avoid confusion. 


Source: Redfin

Single-family homes account for more than two-thirds of investor purchases

Almost seven in 10 investor purchases in Q4 2023—68.6% to be exact—were single-family homes. That’s down 0.2 percentage points from 68.8% in Q4 2022. 

Condos and co-ops are in second place, accounting for 19.2% of investor purchases (up from 17.9% a year earlier). In third place are townhouses at 7.1% (vs 8% a year earlier), leaving multifamily properties dead last at 5.1% of investor purchases—down from 5.3% in Q4 2022.


Source: Redfin

Byron tied this to Fed policy and its impact on the housing market: 

This also speaks to what the Fed has created… The Fed doesn’t care if people are homeowners. They want to stabilize prices… Stabilize prices means go rent. If you can get a rent cheaper than a mortgage, great! Helps the fight against inflation.

Byron Lazine

He expanded on that by saying the policies coming out of Washington D.C. support more people renting rather than buying homes, resulting in a housing market that supports fewer buyers and incentivizes investment in rental properties. Fewer buyers means more renters.

It’s why [you hear] “A lot of my clients own 2-3 homes. What’s up with that?” Well, this [real estate] market serves less people—because of the affordability issues, not only on the rates but also on just what’s available…And, of course, there’s no question investors want those lower-priced properties as well.

Byron Lazine

Read the full report for more information, including metro-level stats and methodology