A pair of new reports look at the role investors played in the housing market last year and offer insights into their current outlook and pain points.
April 9, 2024
3 minutes
Key points:
- Investors accounted for nearly 29% of home purchases in December — a new record, according to CoreLogic.
- Investors feel better about current market conditions compared to a year ago, but near-term outlook is more mixed, a separate report found.
- Pain points include high borrowing costs and rising home prices, along with steep home insurance prices.
Despite the turbulent headwinds in housing last year, a pair of new reports suggest that real estate investors remain relatively optimistic going into the spring market after buying up a record share of homes late last year.
Investors scooping up more properties than ever
New analysis from CoreLogic indicates that the share of U.S. home purchases by investors hit an all-time high in the fourth quarter of 2023. In October, investors accounted for 28% of purchases, while they made up 27.3% of purchases in November and nearly 28.7% in December. The previous record high was 28.3% in February 2022.
This increasing interest and volume of investor purchases "makes the investor share rising above 30% in 2024 a distinct possibility," the CoreLogic researchers said.
Even with the rise of investor purchases, the report suggests that "investors are likely only making a small dent in homeownership numbers," as 19% of investor home purchases are from other investors. And while overall investor purchases are not expected to drop substantially in the near term, some types of purchases have dipped, such as those made by home flippers.
However, the iBuying space has seen the biggest retreat, CoreLogic notes, falling from its peak of 9,000 homes acquired around September 2021 to just over 2,000 homes per month by the end of 2023. For much of 2023, iBuyers were only purchasing about 1,000 homes per month.
Outlook is largely positive
In the investor sentiment report from RCN Capital and CJ Patrick Company, researchers found that real estate investor sentiment remains positive, though it may be better described as cautiously optimistic than outright glowing.
When asked how the current investing landscape compares to a year ago, 16% of respondents reported conditions being "much better," while 20% said it was simply "better" and 36% said it was "about the same." Just over 19% of those surveyed said the market for investing was worse, while nearly 8% said things were much worse.
The report authors noted that negative sentiment was at its lowest point in the history of the survey, while neutral or positive sentiments were at an all-time high.
They also mentioned that sentiment is higher among flippers than rental investors —a theme reflected in other recent surveys.
When asked about their outlook six months from now, more than 41% of investors said they expected conditions to be "better" or "much better" compared to market conditions today. Another 41% predicted conditions would be "about the same."
Investor hurdles: Financing and insurance costs
However, perhaps more interesting are the challenges flippers and investors said they faced. When asked about the biggest hurdles to investing, nearly 71% pointed to the high cost of financing. Roughly 45% of respondents said that rising home prices were also a major problem. Other top issues were lack of inventory and competition from institutional investors.
But investors have confronted another major issue in the last year: skyrocketing home insurance costs. Over 68% of respondents said high home insurance prices are "becoming a factor" in home purchases, while 56% said high insurance costs have actually derailed an investment opportunity.
This issue is particularly troublesome in Florida and California, where insurers have begun to leave those markets due to increasingly extreme weather and natural disasters.
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