According to the Realtor.com® Spring 2023 Investor Report, investors who typically rent out their properties to tenants purchased 8.2% of homes in December 2022. This is down from the peak in February 2022, when they purchased 8.9% of the homes on the market. However, it is somewhat higher than in December 2021.

The report suggests that investors are taking a little longer to react to the spike in mortgage rates than homebuyers, as most are making all-cash offers.

The report focuses on investors buying properties to hold and rent, and excludes speculators where possible.

"We have seen that investor activity has started to fall back, meaning that the typical homebuyer will be competing with fewer investors," said Hannah Jones, economic data analyst at Realtor.com." We heard this over and over again during the [COVID-19] pandemic. A family was looking to buy a home, but they were outbid by investors."

From January to June 2022, investors accounted for 8.5 per cent or more of all home sales. But by June, mortgage rates were pushing up, rents appeared to have peaked, cutting into potential profits for landlords, and "the economic outlook has become more uncertain, with fears of a possible recession looming," the report notes.

It is worth noting that it is not only homebuyers who are now better able to compete.

Smaller investors, typically those with fewer than 50 properties, are also buying more homes since larger investors pulled back last summer. in December, small real estate investors accounted for 72.8 per cent of all investor purchases, up from a low of 52.6 per cent in October the previous year.

Jones said that while investors and first-time buyers and other homebuyers may want the same properties, their motivations and considerations are very different.

"When it comes to deciding to buy a home," says Jones, "a typical household is thinking, 'Do we need to buy a home now and can we afford the place we want?" It has a lot to do with personal circumstances."

In contrast, investors are thinking more about the return on their investment - in terms of buying and later selling the property, and how much rent they can collect from it. Investors also have more access to cash, whereas households tend to rely on obtaining a mortgage.

These differences can be clearly seen in the buying activity in 2022. Investors accounted for more purchases, in large part because regular homebuyers scaled back as mortgage rates soared. Throughout the year, non-investors purchased 16.6% fewer homes compared to 2021, while investors increased their purchases by 6.4%.

It wasn't until mid-year, when house prices and rents peaked, that investors started pulling back.

"Once prices got so high, the return on investment for investors became a bit suspect," Jones said." They are no longer as motivated to compete as they once were. And as rents have fallen, the value proposition has been eroded."

Today's investors and many homebuyers are chasing the same thing: lower prices. in 2022, 12.2 per cent of homebuyers in the South are investors, as are 9.3 per cent of homebuyers in the Midwest. Home prices in these two regions are typically lower than in the Northeast and West.

"Affordability," says Jones, "is the main driver of the market right now." Traditionally affordable areas are continuing to see more investor activity. But they're also seeing more activity from traditional homebuyers."

To reach its conclusions, Realtor.com reviewed deed records for single-family homes, condominiums, townhouses and row houses from January 2000 to December 2022. Data is available nationally, as well as for 263 metropolitan areas with more than 100 investor sales in 2022.

Realtor.com only analysed absentee owners with "LLP", "LP", "LLC", "GP" or "TRUST" in their name and excluded keywords and sales that may have been associated with homebuilders, relocation companies, government agencies and financial institutions. Multi-family construction, large house flipping businesses and iBuyers were excluded from the analysis. Small investors not registered as companies, which typically account for more than a third of individual investors, were also excluded from this report.