2022’s shaky second half nudged many investors away from housing (at least temporarily). As a result, the lane is now wide open for those jaded buyers who’ve faced far too many bidding wars against investors.
The number of homes scooped up by investors fell at a record pace last quarter amid higher mortgage rates and forecasts calling for substantial declines in home prices—further clouding the outlook for real estate investing but a positive development for potential home buyers looking to reap the benefits of falling housing prices.
Last quarter’s drop in investor purchases surpassed the largest decline during the subprime mortgage crisis in 2008, when investor purchases slumped 45% as the housing market abruptly imploded. EDUCATION IMAGES/UNIVERSAL IMAGES GROUP VIA GETTY IMAGES
KEY FACTS
Investors bought some $31 billion worth of U.S. homes in the fourth quarter as the number of homes purchased fell a record 45.8% year over year—outpacing the 40.8% decline in overall home purchases over the same period, according to a Wednesday report from real estate brokerage Redfin.
Ushering in the stark decline, home prices have fallen 11% from their peak last spring as rising mortgage rates dampened home buyer demand, making it more expensive to borrow money and eating into real estate profits—encouraging many investors to turn to other asset classes offering better returns, Redfin notes.
The average rate on the popular 30-year mortgage climbed to nearly 6.4% last week from 6.2% one week prior and 4.05% one year ago, the Mortgage Bankers Association reported Wednesday, attributing the uptick to stubborn inflation and expectations the Federal Reserve will keep monetary policy restrictive for a longer time.
“That’s good news for individual buyers,” Bokhari says, acknowledging prospective buyers are still grappling with high housing costs but at least are “no longer losing bidding war after bidding war to investors.”
SURPRISING FACT
Last quarter’s drop in investor purchases surpassed the now-second biggest decline, which occurred during the subprime mortgage crisis in 2008, when investor purchases slumped 45.1% as the housing market abruptly imploded.
KEY BACKGROUND
Though low mortgage rates and historically high savings sparked a housing market boom during the pandemic, the Fed’s rate hikes ushered in an abrupt collapse in housing demand that has only recently started to stabilize. Existing-home sales plummeted by nearly 18% last year to about 5 million, according to the National Association of Realtors. “December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates,” says the association’s chief economist, Lawrence Yun. who expects sales will pick up again soon since mortgage rates have “markedly declined” after peaking at more than 7% late last year.
…
Source: https://www.forbes.com/sites/jonathanponciano/2023/02/15/housing-market-downturn-pushes-record-number-of-investors-away-heres-why-thats-good-news-for-home-buyers/?sh=3267c9d9341b&utm_campaign=Homeward%20Bound&utm_medium=email&_hsmi=247440701&_hsenc=p2ANqtz-_qu4c-H4AuHNj7OLKy5M7FnL5UPHetuTnFJyGRhRELH2eOQ_OUiewxT9T8kVRV4SBOwJe8tMUmorJQgoJzYR1jsJA4Xw&utm_content=247440701&utm_source=hs_email