Record 45.8% Drop in Investor Purchases of US Homes in Q4 2022
By Investor purchases of U.S. homes fell a record 45.8% year over year in the fourth quarter of 2022, according to a report from Redfin.[0] This was the second biggest decline in the past decade, following 45.1% during the subprime mortgage crisis of 2008.[1] The high cost of borrowing money and the prospect of substantial home-price declines made real estate investment less attractive.[2]
The report found that median single-family home and condo prices decreased from the third quarter of 2022 to the fourth quarter in 56% of Opportunity Zones around the country and went down at least 5% in almost half.[3] In the second half of 2022, as the US housing market saw prices decline after a decade of almost continual growth, the same drops were reflected in areas outside of the zones in question.[4]
Mountain West cities which saw some of the largest influxes of new residents and subsequent investor interest in 2020 and 2021 are now experiencing the largest declines in purchases.[5] Las Vegas was first on the list with a 67% decrease, and Phoenix came next with a 66.7% decrease.[5]
The dramatic decrease in home values last year was largely attributed to a decrease in homebuying demand due to the rapid increase in mortgage rates, which brought housing affordability to record lows.[6] The average 30-year fixed mortgage rate was 6.36% in December—double the level from the start of 2022.[7] At the start of February, the rates went down, providing buyers some optimism; however, they have now increased back to the same level as December.[8]
FHA loans made up 16% of mortgaged home sales in December—the highest proportion since the start of the pandemic—while roughly one in six (15.6%) mortgaged home sales nationwide used an FHA loan, up from 12.5% a year earlier.[9]
Despite the national market decline in the fourth quarter, signs emerged that Opportunity Zone markets were faring better than other neighborhoods; this was in line with the increases they had seen compared to the nation as a whole during the boom period.[3] In the last few months of 2022, Opportunity Zones with larger portions saw typical values increase by a minimum of 10% both on a quarterly and yearly basis, compared to the rest of the country.[10] Meanwhile, median values were still up year over year in almost the same portion of Opportunity Zones as elsewhere around the country.[11]
0. “Biggest Pullback in Investor Home Purchases Since the Mortgage Crisis of 2008” Builder Magazine, 16 Feb. 2023, https://www.builderonline.com/data-analysis/biggest-pullback-in-investor-home-purchases-since-the-mortgage-crisis-of-2008_o
1. “Investor Purchases of U.S. Homes Fall a Record 45.8%” Realty Plus Magazine, 23 Feb. 2023, https://www.rprealtyplus.com/international/investor-purchases-of-us-homes-fall-a-record-458-109668.html
2. “4Q Report: RE Investing Down 45.8% Year-to-Year” | Florida Realtors, 15 Feb. 2023, https://www.floridarealtors.org/news-media/news-articles/2023/02/4q-report-re-investing-down-458-year-year
3. “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
4. “HOME PRICES IN OPPORTUNITY ZONE REDEVELOPMENT AREAS FALL DURING FOURTH QUARTER” PR Newswire, 16 Feb. 2023, https://www.prnewswire.com/news-releases/home-prices-in-opportunity-zone-redevelopment-areas-fall-during-fourth-quarter-301748422.html
5. “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
6. “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
7. “Redfin: $2.3T In Home Values Lost In 2nd Half Of '22” National Mortgage Professional, 22 Feb. 2023, https://nationalmortgageprofessional.com/news/redfin-23t-home-values-lost-2nd-half-22
8. “Suburban Housing Markets Faring Better Than Cities” DSNews.com, 22 Feb. 2023, https://dsnews.com/news/02-22-2023/suburban-housing-markets
9. “Share Of Homes Bought With Cash Ticks Down From November Peak” Forbes, 15 Feb. 2023, https://www.forbes.com/sites/brendarichardson/2023/02/15/share-of-homes-bought-with-cash-ticks-down-from-november-peak/
10. “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
11. “Single-Family Home, Condo Prices in Opportunity Zones Plummet in Q4” The MReport, 16 Feb. 2023, https://themreport.com/news/data/02-16-2023/single-family-home-condo
