Real estate investor purchases took its largest drop in a year at the end of 2024, with the economy and interest rates both playing a role in the slowdown.
Volume declined 3.9% year over year, the biggest drop in 12 months, according to data from real estate brokerage Redfin. The total number of investment purchase transactions during the quarter came in at 47,004, which was also the lowest mark since 2016.
The pullback points to the variety of challenges real estate investors are facing, including reduced consumer demand, economic worries and limited home affordability, Redfin said. Trends led several researchers to predict stagnant or slowing activity in the segment for 2025.
Sales are slowing as investors are spending more on properties. Investment businesses bought $36.5 billion worth of homes between October and December. The total was 6.3% higher on a year-over-year basis, the same rate of growth as home prices over the same period, according to Redfin’s calculations.
At the same time, the share of homes purchased for investment purposes decreased to 17.1% in the fourth quarter, the smallest slice since 2020. The share dropped from 19% in the fourth quarter of 2023.
The latest data supports findings published toward the end of 2024 by researchers, including Redfin, Corelogic and Attom, which saw economic and housing trends quashing momentum for the segment this year. Smaller businesses, rather than institutional buyers, make up the majority of purchases and will still likely prop up activity.
Gross profits for homes resold by fix-and-flip investors shrank to 28.7% in the third quarter, half of their 2016 peak, Attom said in December. Meanwhile, some Redfin agents similarly reported they were failing to see the same return on investment compared earlier this decade and worried about selling homes at a loss.
At the same time, rental income also stands to bring in less, according to Redfin. “Rents have also plateaued after a boom in apartment construction, meaning it’s less lucrative than it used to be for investors to purchase units to rent out,” the report said.
Florida is feeling the effect of slowing investment activity most acutely, with three out of the top five markets experiencing the greatest drop in purchases. Alongside rising prices and mortgage rates, potential homeowners in the state also face surging home insurance premiums and homeowner association fees, with some providers declining to offer coverage.
Orlando saw a 27.5% decline, followed by Chicago at 23.3%. In third was Miami, where purchases fell 21.3%, with Atlanta and West Palm Beach, Florida, rounding out the top five at 18.4% and 14.5%.
Purchases of condominium units, which figure prominently in the Florida investment market, fell 13% year over year to 8,220 transactions, the lowest number in over a decade. By comparison, single-family investor home purchases dropped off by 1.6% from the fourth quarter 2023.
Seven out of every 10, or 69.4%, of fourth-quarter investor purchases in the U.S. were for single-family homes, with condos accounting for 17.5%. The remainder was split between townhouses at 7.5% and multifamily properties at 5.6%.
