Recent research from CoreLogic in Q3 of 2024 underscores the prominent role of smaller investors, commonly referred to as mom-and-pop landlords, who typically own three to ten properties.
U.S. real Estate investor activity saw only a modest 2% increase in Q3 2024 compared to mid-year, signaling a slow growth trend likely to persist. With mortgage rates and home prices remaining elevated, investors’ share of total home sales is expected to hover near 25% for the foreseeable future.
While smaller-scale investors continue to buoy home prices amid softened demand, historical data from mid-2022 to early 2024 shows no consistent correlation between investor activity and price fluctuations, underscoring the complexity of their market impact.
Q3 Sees a Decline in Investor Purchases
Investor share has steadily declined since peaking at nearly 30% in January 2024, dropping to 23% in June before slightly rebounding to 25% in September. However, this figure remains below the 28% recorded in Q3 2023.
On average, investors purchased 21,000 fewer properties per month in Q3 2024 than in the same period the previous year, with a total of 85,000 monthly purchases. This marks a sharp decline from Q3 2021 and 2022, when monthly purchases averaged 140,000 and 120,000, respectively.
Shifting Market Dynamics and Investor Behavior
Elevated interest rates, high home prices, and uncertain economic conditions have dampened investor enthusiasm. Despite these challenges, investors in Q3 2024 continued favoring lower-priced and moderately priced homes–segments also targeted by first-time homebuyers.
This focus has heightened competition for affordable housing, particularly in the Sun Belt and emerging suburban markets, where investor-driven conversions to rental properties are both fueling local economic growth and raising concerns about housing shortages and rising rents.
Geographic Insights: Key Markets for Investors
Dallas and Houston remain the top metropolitan areas for investor and non-investor purchases, with Atlanta, Los Angeles, and Phoenix completing the top five. Interestingly, Los Angeles, despite its relatively low transaction levels, ranks high in investor activity, highlighting strong interest in the Southern California market.
Mom-and-pop investors dominate, accounting for 60% of investor purchases nationwide. In no top-20 metro area do institutional investors make up more than 5% of transactions. Los Angeles leads the U.S. in total investor share, with 42% of purchases involving investors, though mega-investors accounted for just 2% of those.
Regional Variations in Investor Share
Between Q3 2023 and Q3 2024, investor share declined in most markets, with Idaho, Montana, and Maryland experiencing the largest drops of over 5%. In contrast, South Dakota, Oregon, and the District of Columbia saw increases.
Declines were most pronounced in the South, Mountain West, and lower Midwest, while markets in the Northeast, Upper Midwest, and West Coast showed smaller reductions of 0% to 2%. These trends align with CoreLogic’s Home Price Index, suggesting investors are helping stabilize prices in slower markets.
Balancing the Housing Ecosystem
While the dip in investor activity may ease competition for some buyers, it also highlights the critical role mom-and-pop investors play in maintaining market balance. With high rental demand and persistent affordability challenges, these smaller investors remain pivotal in shaping housing dynamics.
As affordability and housing policy debates evolve, a nuanced understanding of investor influence is essential to addressing market challenges and identifying opportunities for sustainable growth, says CoreLogic.