Investors bought record share of low-priced housing in fourth quarter: Report

Investors bought more than a quarter of affordable homes in the fourth quarter of 2023, as mortgage rates and home prices remained well above pre-pandemic baselines.

Investors bought 26.1% of affordable homes in the U.S. in the fourth quarter, a record high, according to real estate data firm Redfin. The company defines affordable housing as housing that falls in the bottom third of local sales prices in metropolitan areas.

“Rising home prices and mortgage rates, coupled with low rents, are making affordable housing increasingly attractive to investors,” the company said in a statement.

Redfin defines investors as “buyers whose names include…LLC, Inc, Trust, Corp, Homes” or “whose ownership code on the purchase deed includes…associations, corporate trustees, companies, joint ventures, corporate trusts.” identified as “buyer”.

Investor purchases across all levels of the housing market have slowed, falling to 46,419 purchases in the fourth quarter, the lowest level since 2016. This decline reflects a broader slowdown in home purchases.

The January consumer price index released by the Labor Department showed housing inflation at an annual rate of 6.0%, twice the pace at which headline inflation fell to 3.1%.

Monthly shelter cost increases have been rising since October, rising 0.6% last month and accounting for more than two-thirds of total monthly inflation.

Home prices were rising as the Federal Reserve raised interest rates in response to rising inflation. But housing inflation has continued to decline since the Fed began putting the brakes on interest rate hikes about a year ago.

Mortgage interest rates have fallen to 6.6% this month from a high of 7.9% in October, according to government mortgage lenders. freddie mac. Economists expect this trend to continue.

Median housing sales price It has fallen to $417,000 in 2022 from its recent peak of $479,000, but is still significantly above its pre-pandemic 10-year trend line.

The Fed has not yet cut rates, but markets widely expect them to do so at some point this year. Markets expect the Fed to keep interest rates in the 5.25% to 5.5% range at its next meeting in March, given January’s strong employment report.

According to the Census Bureau, the U.S. homeownership rate (the number of people living in owned homes as a percentage of the total number of occupied homes) fell to 65.7% in the fourth quarter, about the same level as the same period last year.

The homeownership rate among young people is now higher than before the pandemic, at 38.1% compared to 37.6% at the end of 2019.

Approximately 90 percent of U.S. housing units were occupied and 10 percent vacant in the fourth quarter of 2023, according to Census data. Owner-occupied homes account for approximately 59 percent of the total housing stock, while rental homes account for 31 percent.