Investors have been pouring more money into the housing market in the second quarter, despite consumers pulling back. According to Redfin, institutional and mom-and-pop businesses accounted for 16.8% of home purchases during this time, making it the second-busiest spring for investors since 2000. This surge in activity comes after a pandemic-era peak of 20.8% in 2022. In total, investors spent $43 billion in the second quarter, marking a 13.7% increase from the same period last year, the largest annual rise in two years.
One key trend that stood out was investors‘ strong appetite for low-priced homes, with nearly 1 in every 4 property purchases falling into this category. Redfin defines low-priced homes as those in the bottom third of local sales prices. Businesses used cash in 69% of their purchases, bypassing the impact of mortgage rates that have kept many borrowers on the sidelines. While mortgage applications are rebounding, overall nationwide home purchases were down 1.9% in the second quarter year-over-year.
This resurgence in investor activity represents a bounceback from last year when their market share fell nearly 50%. The increased interest in the housing market is fueled by rising rental demand, as elevated home prices and mortgage rates have made homeownership out of reach for many Americans. This has led to a surge in demand for rentals, driving investors to capitalize on this trend.
Despite the competitive market, investors are seeing significant profits, with Redfin reporting that they netted six-figure profits on average for homes sold in June. The businesses sold properties for 58% more than the price they bought them for, with only 5% of investors selling homes at a loss during the spring. In some markets, such as Philadelphia, investors saw their typical home sell for more than 133% of its original purchase price.
Miami emerged as the most popular metro for investors in the second quarter, with businesses scooping up 28.2% of homes during this time. Other top investor markets included Las Vegas and Southern California metros. However, some markets saw a decline in investor activity, with Fort Lauderdale and Miami experiencing the most significant pullback.
On the other hand, investors shied away from Providence, Rhode Island, making up just 8.5% of home purchases in the second quarter. This made the city the slowest for investors, ahead of Washington, D.C., and other northern markets. Overall, the housing market continues to be a lucrative opportunity for investors, with strong demand and profitable returns driving their activity in the second quarter.