Investors acquired a record 26% share of affordable homes in the US during the last quarter.

Many individuals seek more affordable housing options but need help in today’s market. Homebuyers searching for budget-friendly homes, especially those buying their first homes, may find themselves competing with investors who are also active in the market. According to Redfin, investors acquired a record 26.1% of low-priced homes in the fourth quarter.

Specifically, low-priced homes comprised 46.5% of investor acquisitions, with mid-priced homes at 24.6% and high-priced homes at 28.8%. Carrie Caruthers, a Redfin Premier real estate agent in California, noted investors’ high demand for under-market-value properties. She also mentioned an increase in foreclosures, which attract significant investor interest due to their lower prices than other homes on the market.

With inventory still low nationwide, sellers are holding onto properties due to historically low mortgage rates they secured in the past. Despite this, investors bought fewer homes in the fourth quarter, with a 10.5% decline to 46,419 purchases, the lowest volume since 2016. Redfin Senior Economist Sheharyar Bokhari suggested that more investors may enter the market if the Federal Reserve lowers interest rates later in the year as anticipated.

The majority of investors’ purchases were single-family homes (68.6%), followed by condos or co-ops (19.2%), with multifamily properties being the least popular (5.1%). Rising mortgage rates have presented challenges for potential homebuyers, with the 30-year fixed mortgage rate reaching 6.87%, the highest since December 2023.

In response to affordability concerns, Democrats in Congress proposed legislation at the end of 2023 to limit large investors’ impact on the housing market. However, it’s essential to note that institutional investors only accounted for 3% of all home purchases in 2021. Most investor activity in recent years has been driven by individual, non-institutional buyers.