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A new analysis by economists at Realtor.com suggest that even as investors are pulling back from homebuying in large numbers as the prices of homes and loans stay elevated, their market share in Massachusetts’ three biggest metro areas is staying steady.
Around 4 percent of Greater Boston home purchases were made by investors in 2022, data provided by Realtor.com shows, up 0.6 percent year-over-year. In Greater Springfield, investors were 3.8 percent of the market last year but only grew their market share by 0.5 percent. And Greater Worcester’s housing market is 3.2 percent investors, an increase of 0.8 percent year-over-year.
Those minuscule gains came as the average price paid by Worcester- and Boston-area investors buying single-family homes and condominiums jumped 15.2 percent and 17.6 percent year-over-year, respectively, to $296,000 in the Worcester area and $521,000 in the Boston area.
In the Springfield metro, the average price investors paid rose only 0.6 percent, to $180,000, but the nearby Hartford metro area saw the eighth-biggest growth in investor purchases nationally. Investors made up 5.7 percent of single-family and condo buyers last year, up 3.9 percent.
Nationally, investor purchases jumped the most in Memphis, Tennessee, where they made up fully 24.5 percent of single-family and condo buyers, an increase of 7.5 percent year-over-year. The Honolulu, Hawaii metro saw the next-largest increase, of 5.8 percent, to an investor market share of 11.6 percent. The Cape Coral-Fort Myers, Florida area rounded out the top three metros where investor market share was growing the fastest, with 5.2 percent growth year-over-year and an investor market share of 13.1 percent.
Memphis had the largest share of investor buyers in 2022, followed by St. Louis, Missouri at 21.1 percent and Indianapolis at 19.2 percent. By and large, most investor activity remained concentrated in the South and Midwest, with only 6.1 percent of single-family and condo homes bought in the Northeast last year being investor purchases.
The gains happened even as larger institutional actors pulled back last year, Realtor.com economists said, leaving the sector to small investors who had purchased 10 or fewer homes since 2001.
But it appears that the slight fall-off in investor activity Realtor.com economists observed as 2022 drew to a close has accelerated.
A separate analysis by economists at listings portal and brokerage Redfin, released Wednesday, found real estate investors purchased 48.6 percent fewer homes in the first quarter of 2023 compared to the same time last year, outpacing a 40.7 percent drop in overall home sales nation-wide. It’s also the largest year-over-year decline on record and was partly driven by a significant decline of investor activity in the Sun Belt, Redfin researchers said. Baltimore saw the smallest decline in investor purchases, at 8.8 percent year over year in the first quarter, followed by Providence, Rhode Island with a 9.6 percent year-over-year decline.
“While investors have pumped the brakes on home purchases, they’re still scooping up a bigger share of homes than they were before the pandemic, which can create challenges for individual buyers at a time when there are so few homes for sale,” Redfin Senior Economist Sheharyar Bokhari said in a statement. “Investors have gravitated toward more affordable properties due to still-high housing costs and rising mortgage rates, which has left first-time homebuyers with fewer starter homes to choose from.”
On top of the continuing durability of home prices and high interest rates, Bokhari and his colleagues blamed a slowing of rent growth and growing worries about a possible recession for the decline in investor purchase activity.
