Investor Home Purchases Drop 30% as Rising Rates, High Prices Cool Housing Market

[mahatmakanejeeves]

Real Estate

Investor Home Purchases Drop 30% as Rising Rates, High Prices Cool Housing Market

Buying activity by companies fell in line with the decline in overall home sales amid higher borrowing costs

By Will Parker
https://twitter.com/_willparker_
[e-mail]
Updated Nov. 22, 2022 1:11 pm ET

Investor buying of homes tumbled 30% in the third quarter, a sign that the rise in borrowing rates and high home prices that pushed traditional buyers to the sidelines are causing these firms to pull back, too.

Companies bought around 66,000 homes in the 40 markets tracked by real-estate brokerage Redfin during the third quarter, compared with 94,000 homes during the same quarter a year ago. The percentage decline in investor purchases was the largest in a quarter since the subprime crisis, save for the second quarter of 2020 when the pandemic shut down most home buying.

The investor pullback represents a turnaround from months ago when their purchases were still rising fast. These firms bought homes in record numbers last year and earlier this year, helping to supercharge the housing market.

Now, investors are reducing their buying activity in line with the decline in overall home sales, which have slumped with mortgage rates rising fast. But with investors’ large cash positions, and with big firms such as JPMorgan Chase & Co. planning to increase its exposure to the home-buying business, investors are poised to resume more aggressive buying when rates or home prices begin to ease.

{snip}

Write to Will Parker at [e-mail]

Appeared in the November 23, 2022, print edition as 'Home Sales to Investors Slide 30%'.

[GreenWave]

1. Not just high, hallucenogenically high.

Sometimes 2 to 3 times the value in very recent years.

[hlthe2b]

2. I hope every damned one of them loses their shirts.

Yes. I mean that.

[Midnight Writer]

3. It's enlightening to read the Property History on Zillow and other sites.

Folks seem to believe the value of their homes have doubled in the last 3-5 years.

[Backseat Driver]

7. Yup, and those that list want every single penny back on everything they believe improved their

"housing unit" via the "gap," though it usually amounts more to lipstick on a pig, often by flippers and RE stagers fees.

[Backseat Driver]

4. "."..investors are poised to resume more aggressive buying when

rates or home prices begin to ease."

Well, of course they will...

[SWBTATTReg]

5. And I am waiting for the other shoe to drop, prices of housing to drop too. The Cars/etc. markets

(used and new) has dropped (or has starting dropping big time) recently (I've been watching and waiting, want to buy a replacement vehicle). Houses and other investment type of assets will follow shortly. I suspect that there are lots of buyers perhaps waiting on the sidelines so that these bubbles can subside, and more reasonable / affordable prices are back again. Used car prices are already roughly back to where they were a year ago, and I'm continuing to wait until probably after year end to buy (to avoid paying personal property taxes in MO, gives me an extra year so to speak).

Trends are going our way (for those of us wanting to buy a vehicle, and the housing market, although I haven't paid that much attention to it, I'm hearing that buyers are pulling out of deals, etc. as interest rates are going up).

[progree]

6. Mortgage rates are coming down...

Mortgage rates plunge, largest weekly drop since 1981, CNN, 11/17/22

Editor’s Note: Freddie Mac, which has tracked weekly average mortgage rates since 1971 and has periodically made changes to its Primary Mortgage Market Survey, changed the source of its data as of November 17, 2022. Instead of surveying lenders, the weekly results will be based on applications received by lenders that are submitted to Freddie Mac. Find more about Freddie Mac’s change here.

The 30-year fixed-rate mortgage averaged 6.61% in the week ending November 17, down from 7.08% the week before, according to Freddie Mac, the largest weekly drop since 1981. A year ago, the 30-year fixed rate stood at 3.10%.
More: https://www.cnn.com/2022/11/17/homes/mortgage-rates-november-17

The methodology change may be some of that, but the 10 year Treasury note, which mortgage rates tend to follow closely, are also down considerably.

Mortgage rates tend to track the yield on 10-year US Treasury bonds. As investors see or anticipate rate hikes, they make moves which send yields higher and mortgage rates rise.

“The 10-year Treasury dropped from 4.15% last Wednesday to 3.68%, as capital markets seemed to cheer the slowdown in inflation as a sign that the Federal Reserve’s monetary tightening is having its intended effect,” Ratiu said.

[SWBTATTReg]

8. Thanks for the update, maybe some slimmer of hope for those waiting on the sidelines for a house...

Markets have been crazy, especially in the vehicle markets (new and used), and tons of vehicles are sitting on car lots, auctions, etc. waiting to be moved, dealers know that they have to take a hit, and thus trying to unload unsold excess inventories. There are some good 'buying cars' videos on YouTube.