PHOENIX — In the year following the COVID-19 pandemic, investment companies flooded into the real estate market.
Record low-interest rates and climbing home values and rents created a perfect storm. New data from redfin.com now shows those same investment companies are fleeing the market.
In the first quarter of this year, investor home purchases plummeted compared to the year prior.
Data shows a 49% drop in investor purchases nationally, the largest drop on record. At first glance, the numbers look like a crash, but it is equally plausible that the decline is just a market correction.
The Phoenix real estate market was once one of the hottest in the country for investor purchases. While the market has pulled back considerably, investors still factor in.
In this past quarter, $1.6 billion worth of Phoenix property was bought by investors. This amounts to 5% of the value of all investor purchases nationwide.
The median price paid by investors was $400,000 with about one in five homes being investment purchases.
The annual drop in investor purchases in Phoenix is over 64%, the fourth largest drop in any real estate market led by Nassau County New York, Atlanta and Charlotte.
One of the major explanations for the decline is simple economics. Redfin says as many as 31% of homes in Phoenix are being sold at a loss. Ranked number one among the top 50 real estate markets.
Investors are buying homes at a median price of $400,000 but selling them for only $10,000 more. Which is not enough in most cases to recoup any associated expenses. The annual sales price of investment properties is also down 9%.
Is this a retreat or a correction?
The median market share for investment purchases every quarter going back to the year 2000 is 15%. That market share skyrocketed up past 30% in the quarters following the COVID-19 lockdown.
It’s fallen back to Earth to 18%, still over the median line. This indicates the home investment market may not be in a full crash but may simply be getting closer to what is considered “normal” purchasing volumes.
Paradise Valley and El Mirage, two very different regions of the Valley, are the places investors are buying the most property. San Tan Valley, Glendale, and Tolleson round out the top five. New River, Tempe, and the two largest retirement communities; Sun City and Sun Lakes, are among the lowest areas for investment purchases.
See all Redfin.com tracked zip codes here:
