Real estate investors bought 1 out of every 6 homes sold in Q2

As ordinary Americans struggle with record-low housing affordability, investors are snatching up residential properties at the fastest clip since the pandemic.

According to Redfin, investors purchased one out of every six homes sold in the second quarter, worth roughly $43 billion. Investor purchases rose 3.4% year over year, the largest increase since 2022.

Even more eye-opening is the fact that the value of the properties investors bought increased by 13.7% year over year, also the largest since 2022.

Investors showed the most interest in what Redfin classifies as affordable homes, buying one out of every four low-priced properties that sold between April and June.

Real estate investors tend to have deeper pockets than homebuyers. Unlike most Americans, investors can often afford to pay in cash, reducing or eliminating the need for a costly mortgage.

As Redfin noted, savvy investors understand that homebuying is becoming increasingly unaffordable, driving more people to the rental market.

“One reason real estate investors are coming out of hibernation is to take advantage of robust demand from renters,” said Sheharyar Bokhari, Redfin’s senior economist.

“Elevated home prices and mortgage rates have pushed homeownership out of reach for a lot of Americans, which is fueling demand for rentals,” said Bokhari.

Creditnews first reported that real estate investors were coming out of hibernation in June. At the time, investors snatched up roughly 44,000 homes in the first quarter, a 0.5% increase from a year earlier.

Although cash-flush investors have a clear advantage in today’s housing market, buying homes as an investment isn’t the golden ticket it used to be.

Real estate investing isn’t all that it’s cracked up to be

Investing in real estate often pans out in the long run, but not without major pain points. According to a Clever Real Estate survey, 90% of investors have lost money on at least one property.

Perhaps the most shocking part of the survey is that 52% of investors reported losing $100,000 or more on a single investment. Nearly half (42%) said they lost at least $200,000 on a single purchase.

Whether investing in long-term rentals, short-stay vacation homes, or house flipping, investors seem to be running into the same problems.

The report concluded that the days of easy-to-find deals at rock-bottom interest rates are long over.

For all the talk about the office apocalypse, most of the distressed properties in the U.S. today are multifamily residential buildings—the kind that small investors pile into.

According to MSCI, more than $56 billion worth of multifamily units are at risk of financial trouble. As Bloomberg reported, “much of the unraveling is centered on personal investors.”

“When you’re at a casino, you know what you’re doing is gambling,” Aleksey Chernobelskiy, who heads Centrio Capital Partners, told Bloomberg. “Here, people were gambling, but they didn’t know it.”