Homebuyers and small investors face less competition as professional investors pull back. 

Professional investors might be tapering down their home purchases, which could be a good development for frustrated homebuyers who find it hard to compete with investors’ lofty, quick-close, all-cash offers. Investors who typically rent out their properties to tenants purchased 8.2% of homes in December 2022, according to the Realtor.com® Spring 2023 Investor Report. That was down from the peak in February 2022 when they bought up 8.9% of homes on the market. However, it was a bit higher than in December 2021. The report suggests investors took a bit longer to respond to surging mortgage interest rates than homebuyers did as the majority made all-cash offers. The report focused on investors who purchase property to hold and rent out and excluded home flippers as much as possible.

“We have seen that investor activity has started to come down, which means that the typical homebuyer would be competing with fewer investors,” says Hannah Jones, an economic data analyst at Realtor.com. “We heard this over and over during the pandemic. A family is looking to buy a home, but they got outbid by investors.” From January to June 2022, investors made up 8.5% or more of all home sales. But by June, mortgage rates were pushing higher, rents appeared to have peaked, cutting into potential landlord profits, and “the economic outlook became more uncertain and fears of a possible recession loomed,” the report states. Notably, it’s not just homebuyers who are better able to compete now. Smaller investors, typically those with fewer than 50 properties, are also buying up more homes since the larger ones pulled back last summer. In December, mom-and-pop real estate investors made up 72.8% of all investor purchases, up from a low of 52.6% the previous October.

Source: Realtor.com