The Blubber

Nearly 29% of single family homes were purchased by investors in Miami, per Redfin.

At the beginning of last year, investors significantly pulled back, with their home purchases plummeting nearly 50%, according to Redfin. This drop wasn't far off from the broader decline in existing home sales, which reached their lowest point in nearly 30 years.

This marked a sharp contrast from their activity during the pandemic-driven housing boom when investor home purchases more than doubled. At that time, everyone was buying homes due to historically low mortgage rates and the rise of remote work. But things changed when mortgage rates soared, home values declined in some areas, and rents cooled—hitting investors' profits hard. Plus, borrowing costs had risen sharply.

Now, investors are making a return. "Investor home purchases are rising—albeit slightly—for the first time in almost two years," according to Redfin. A newly published analysis from the real estate brokerage found that investors bought 44,000 homes in the first quarter, a slight increase of 0.5% from the previous year. (Redfin defines an investor as "any institution or business that purchases residential real estate.")

In the first quarter of this year, investors purchased nearly 19% of all homes sold, meaning roughly one in five homes, according to Redfin. While this is fewer homes than during the pandemic, it represents the highest share in nearly two years.

The reason for this resurgence is that "with home prices and rents back on the rise and the initial shock of elevated mortgage rates behind them, investors are easing their foot off the brake pedal," according to Redfin. As a result, they're earning more than they did a year ago. In March, the typical home sold by an investor yielded a return of just over 55%, or nearly $175,000 in profit. Last year, the typical investor sold a home for over $146,000 more than they paid, equating to a 46% return. Additionally, fewer investors are selling at a loss.

Redfin’s analysis also revealed that investors are now buying both more expensive homes and a record share of the country’s most affordable homes. "The typical home purchased by investors in the first quarter cost $464,560, up 9.2% from a year earlier," the report said. "Investors purchased $31.3 billion worth of homes in the first quarter, up 6.6% year over year."

Interestingly, while the increase in purchases of more expensive homes was the most significant in the first quarter, low-priced homes still make up a larger share of investor activity. Low-priced homes accounted for 47.5% of investor purchases in the first quarter, while high-priced homes made up 28.5%, according to Redfin. A considerable portion of the increase in high-priced home purchases was driven by investors' growing presence in California. In cities like San Francisco and San Diego, investors bought over 23% of homes sold in the first quarter—among the highest shares, rivaled only by cities in Florida, such as Miami and Jacksonville.

However, the profit margins in San Francisco pale compared to, say, Philadelphia. In San Francisco, the typical home sold by an investor fetched close to 29% more than its purchase price, whereas in Philadelphia, the typical investor home sold for over 136% more than what was initially paid.