Investor Purchases Of U.S. Condos Drop To Lowest Level Since 2012
The high cost of residential ownership is not just tamping down demand from homeowners but investors as well.
Investors bought 8,220 condo units across the U.S. in the fourth quarter, down 13% year-over-year and the fewest for that time of year since 2012, according to an analysis by real estate brokerage Redfin.
The pullback in condo buying was especially pronounced in Florida in the months after two hurricanes ripped through the state and as association fees are expected to rise dramatically in older buildings as a result of recent state legislation. In Orlando, investor condo buys fell 30% in the fourth quarter compared to the same period in 2023, according to Redfin. Investors bought 26.1% fewer units in Tampa and 22.9% fewer units in Miami than they did a year prior.
The dip was less pronounced among other residential property types. Townhome sales to investors fell 6.1% and single-family home buys fell 1.6% in the same period.
Acquisitions by investors in two- to four-unit properties, by contrast, increased nearly 3%. Investors represented the highest share of the small multifamily market since 2019, according to Redfin.
Condo owners in Florida have especially felt the brunt of the slowdown, flooding the market with listings. At the end of last year, owners had 19,000 active condo listings in South Florida, 86% of which were older units, Bisnow previously reported. That pushed prices down 21% last year, and market watchers project values could fall by as much as 38% in the next few years.
The rush to sell is largely motivated by a state law passed in 2022 that required condo associations of buildings 30 years or older to conduct structural integrity studies by last December and fund their reserves to cover needed maintenance by the end of this year. The law could result in some owners paying upwards of $175K per unit to cover special assessments, Bisnow previously reported.
“That inventory just keeps growing every single month in MLS because the people that own those units just want to get out,” ISGWorld CEO Craig Studnicky said in October. “The problem is that nobody wants to buy them, and if there are a few people that want to buy them, there certainly are no mortgage lenders that want to lend. So, that inventory is almost useless for us at the moment.”
While the most pronounced, Redfin reported that overall U.S. home purchases by investors have fallen back nationwide to 47,000 units in Q4, down nearly 4% from a year earlier to the lowest level since 2016.
Investors are shying away from housing because of high mortgage and interest rates, economic uncertainty, rising inventory, falling rents and concerns about failing to make profits when flipping units, according to Redfin’s Lily Katz and Grishma Bhattarai, who authored the report.
While home sales by dollar volume increased more than 6% to $36.5B in the fourth quarter, that increase was equal to the jump in home prices in that period, according to Redfin.
The region seeing the most interest is the West Coast, where investors purchased 33.8% more homes in Seattle during Q4 than the year before, with San Jose, Oakland and San Francisco, California, all posting big gains.
