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Investors nabbed over a quarter of low-cost homes sold in Q4

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Although 26 percent of low-cost homes were purchased by investors during the last three months of 2023, the share of homes bought by investors fell.

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Investors purchased more than a quarter of the nation’s most affordable homes that were sold during the fourth quarter of 2023 — a record high, according to a new report.

Twenty-six percent of low-cost homes were purchased by investors during the last three months of 2023, according to data from Redfin, as the combination of elevated home prices and high mortgage rates made cheaper homes more attractive to property investors.

The share is up from the fourth quarter of 2022 when investors purchased 24 percent of the low-priced homes on the market. By comparison, just 13.6 percent of mid-priced homes were purchased by investors in the fourth quarter of 2023 (down from 14.3 percent the year earlier) and just 15.9 percent of high-priced homes that sold (up slightly from 15.9 percent the year prior.)

“I get tons of emails every day from investors looking for properties, but of course, they only want homes that are under market value, which are hard to come by. When they find those properties, they pile in,” Riverside County, California-based Redfin Premier agent Carrie Caruthers said in a statement.

Caruthers said her market has seen an uptick in foreclosures — a trend in line with national data, which shows that foreclosures were up 5 percent annually in January and up 10 percent from the previous month, according to Attom. This has provided increased opportunities for investors looking for cheap homes, as foreclosed properties tend to be less expensive.

“I’ve recently seen an uptick in foreclosures, which investors are interested in because they often sell at a discount. I just sold one foreclosed house to an investor for $400,000. It probably would’ve sold for around $500,000 if it hadn’t been a foreclosure, but the investor got a deal because foreclosure purchases come with risks,” Caruthers said.

While the share of affordable homes purchased by investors increased during the last months of 2023, the overall share of homes purchased by investors dropped 10.5 percent year over year during the same period to 46,419 homes — the lowest fourth-quarter figure since 2016, and the sixth straight year over year decline, according to Redfin’s records. It pales in comparison, though, to 2022’s fourth quarter drop, which saw investor purchases fall 44.1 percent lower than they were a year earlier as investors pulled back aggressively from the shock of rising interest rates.

Investor home purchases have fallen as high mortgage rates, high prices and a less inflated rental market have made property investment less lucrative than it was during the pandemic. However, Redfin agents quoted in the report said some markets still have plenty of investors and that purchases have fallen only because inventory is so low.

“There are a lot of investors out there fighting for properties,” Juan Castro, a Redfin Premier real estate agent in Orlando — which posted the third largest drop in investor purchases in the country last quarter — said in a statement. “There just aren’t enough properties to go around, which is putting a cap on how many homes investors can buy.”

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