Investor Home Purchases Drop 45.8% in Fourth Quarter of 2022, Opportunity Zones Withstand Market Retreat
By Investors pulled back on home purchases in the fourth quarter of 2022, according to a new report from Redfin. Investor home purchases dropped 45.8% year over year in the fourth quarter and declined 27% from the third quarter, resulting in a total of $31 billion worth of homes bought in that period — a 42.7% decrease from the same period in 2021.[0] The rapid rise in mortgage rates had pushed housing affordability down to historically low levels, causing many potential homebuyers to miss out on a significant wealth building opportunity.[1]
Opportunity Zone markets, however, were withstanding the national market retreat better than other neighborhoods, just as they outperformed nationwide increases by some measures during the boom period.[2] In the last few months of 2022, Opportunity Zones with larger portions saw typical values increase by 10% or more on a quarterly and annual basis compared to the rest of the US.[3]
Roughly one-third (31.2%) of U.S. home purchases were paid for with all cash in December, according to Redfin.[4] The percentage has increased from 28.8% in the previous year, but has decreased from the highest point of 31.9% in November over the past eight years.[5] Las Vegas saw the largest drop in investor purchases, dropping 67% year over year, followed by Phoenix at 66.7%, Nassau County in New York, Atlanta and Charlotte, North Carolina.[6]
In San Francisco, values have decreased more than any other coastal metropolis that had previously been known for its extravagant lifestyle.[7] There, the collective worth of the housing market fell 6.7%—or $37.3 billion—year over year in December to $517.5 billion, a larger drop in percentage terms than any other major U.S. metropolitan area.[8]
FHA loans make up 16% of mortgaged home sales, the highest portion since the start of the pandemic, indicating that some buyers are able to access lower mortgage rates.[9] Redfin economists note that it is unlikely that investors will return with the same vigor as in 2021, which is good news for individual buyers who are still grappling with high housing costs.[10]
0. “Investor purchases fell by record amounts at end of 2022” National Mortgage News, 15 Feb. 2023, https://www.nationalmortgagenews.com/news/investor-purchases-fell-by-record-amounts-at-end-of-2022
1. “U.S. home values slump by $2.3T since June peak, Redfin says (NASDAQ:RDFN)” Seeking Alpha, 22 Feb. 2023, https://seekingalpha.com/news/3939136-us-home-values-slump-by-23t-since-june-peak-redfin-says
2. “Top 10 Opportunity Zones with Lowest Median Home Prices” ATTOM Data Solutions, 17 Feb. 2023, https://www.attomdata.com/news/market-trends/figuresfriday/top-10-opportunity-zones-with-lowest-median-home-prices
3. “ATTOM Report Uncovers Continued Strength of Opportunity Zone Markets” Mortgageorb, 16 Feb. 2023, https://mortgageorb.com/attom-report-uncovers-continued-strength-of-opportunity-zone-markets
4. “10 U.S. Cities With the Highest Share of All-Cash Home Sales” msnNOW, 17 Feb. 2023, https://www.msn.com/en-us/money/realestate/10-u-s-cities-with-the-highest-share-of-all-cash-home-sales/ar-AA17CXFl
5. “Suburban Housing Markets Faring Better Than Cities” DSNews.com, 22 Feb. 2023, https://dsnews.com/news/02-22-2023/suburban-housing-markets
6. “Investors Purchases of Single-Family Homes Drops By Almost Half” Route Fifty, 17 Feb. 2023, https://www.route-fifty.com/infrastructure/2023/02/investors-purchases-single-family-homes-drops-almost-half/383128/
7. “U.S. Homeowners Have Collectively Lost $2.3 Trillion in Property Value Since the Summer” Mansion Global, 22 Feb. 2023, https://www.mansionglobal.com/articles/u-s-homeowners-have-collectively-lost-2-3-trillion-in-property-value-since-the-summer-81f3ab46
8. “Real estate: US homeowners have lost $2.3 trillion since June: Redfin data” Yahoo News, 22 Feb. 2023, https://news.yahoo.com/real-estate-us-homeowners-have-lost-23-trillion-since-june-redfin-data-194008081.html
9. “Changing Market: More VA-FHA Loans, Cash Sales” | Florida Realtors, 15 Feb. 2023, https://www.floridarealtors.org/news-media/news-articles/2023/02/changing-market-more-va-fha-loans-cash-sales
10. “Homebuyers could win as real-estate investors flee once-hot US cities” Business Insider, 23 Feb. 2023, https://www.businessinsider.com/homebuyers-win-real-estate-investors-flee-hottest-housing-markets-2023-2
