Investor purchases hit 6-year low
Real estate investors are pulling back as rising homeownership costs, economic uncertainty and slowing price growth in some areas threaten to reduce profits.
With housing costs still elevated and the market in a slump, investors may have decided that buying up properties makes less business sense than it did a few years ago.
And, like traditional homebuyers, economic uncertainty due to the ongoing war in Iran, rising inflation and financial market instability are also causing investors to think twice about jumping into the residential real estate market.
Waning investor activity: Home purchases by investors declined 6% year-over-year during the first quarter of 2026, falling to their lowest level since 2020 — when the Covid-19 pandemic caused buyers to temporarily pull back — according to new data from Redfin. Prior to the pandemic, national investor purchases hadn't hit such a low rate since 2016.
Redfin's report analyzed all businesses that buy residential real estate, including both mom-and-pop and institutional investors.
Investor-owned properties made up 19% of the market share during Q1, similar to a year earlier, Redfin said — an indication of how slow the market has been during the first quarter.
Likewise, the percentage of investor-owned homes for sale was down last quarter at just 7.8% of all listings in the U.S. — the lowest share in five years.
A matter of ROI: For investors, the math no longer makes as much sense as rising costs eat into profits.
Mortgage rates are about double what they were during pandemic-era lows, and stalled home price growth in many areas of the country (and price drops in some places) have dissuaded some investors from buying more property.
While lower home prices offer an advantage on the front-end of the transaction, investors are seeing little evidence that prices will grow enough for them to make a profit when it's time to sell. The increasing cost of insurance premiums, property taxes and maintenance are also chipping away at investors' potential profits, Redfin found.
With the rental market also cooling — according to a recent Zillow report, nearly 40% of rentals are offering concessions this spring — there's also little incentive for investors to become landlords.
Fewer investors in the market could be a good thing for the average consumer, however, reducing the overall number of other buyers competing for homes.
The starkest regional divides: The metro with the greatest dip in investor activity was Detroit, where investor home purchases dropped 35% year-over-year, followed by Orlando, where purchases decreased 25%, largely due to factors like declining prices, high HOA fees and soaring insurance costs.
Cleveland saw the third-largest drop, with investor purchases decreasing 21% annually.
The Bay Area and Virginia Beach, in contrast, saw the biggest jumps in investor purchases, which were up 19% in San Francisco, 15% in Virginia Beach and 12% in San Jose. Growing investment in Silicon Valley is a nod to the area's currently booming housing market as a result of an influx of workers and investment tied to AI.