Investor purchases of US homes plummeted 30% in the third quarter, the biggest drop since the 2008 financial crisis. housing market.
Businesses bought about 65,000 homes in cities tracked by real estate broker Redfin, compared with 94,000 in the same period a year ago, according to a new analysis released Tuesday. It was the worst quarterly decline in more than a decade outside of the second quarter of 2020, when the pandemic brought home buying activity to a screeching halt.
Overall, investor purchases accounted for 17.5% of all homes sold, down from 19.5% in the second quarter as companies exited amid the prospect of significant price declines.
“Investors are unlikely to return to the market in a big way any time soon. For that to happen, house prices will need to fall significantly,” said Sheharyar Bokhari, senior economist at Redfin. “This means that regular buyers still in the market are no longer facing as much competition from the hordes of cash-rich investors as they were last year.”
Nationwide, home prices are up just 3% year-over-year, the slowest annual growth rate since 2020, according to Redfin. In some markets, prices are already significantly lower than they were just a year ago.
The interest rate-sensitive housing market has started to cool significantly in recent months. federal reserve We are tightening policy at the fastest pace in 30 years. The policymaker has already approved six consecutive rate hikes, including his four 75 basis point hikes in June, July, September and November, to crush stubborn high inflation. However, there are no signs of a pause.
average rate of 30 year fixed mortgage Recent data from mortgage lender Freddie Mac showed it dropped to 6.61% in the week ending Nov. 17, well below the previous week’s 7.08%. Still, the interest rate was 2.98% for him, just as he was significantly higher than a year ago.
Painfully high inflation and rising borrowing costs are already proving to be a deadly combination for the housing market, forcing potential buyers to hold back on spending.
Analysts have warned of a sharp slowdown in the housing market, with house prices expected to fall by up to 20%, according to an analysis by Dallas Fed economist Enrique Martinez Garcia.
Martinez Garcia said: of the Federal Reserve Efforts to slow housing demand could have ripple effects in the broader economy. In a ‘pessimistic’ scenario, where central banks continue to raise interest rates aggressively and prices fall between 15% and 20%, private housing demand could fall by as much as 0.5% to 0.7%. A data point that measures consumer spending, inflation-adjusted spending.
“Such a negative wealth effect on aggregate demand would further constrain housing demand, deepening price adjustments and initiating a negative feedback loop,” he warned.