It appears investors’ pandemic-era real estate buying frenzy is starting to wear off.

A new analysis released Wednesday found home purchases made by investors declined in the first three quarters of 2023, tumbling an average 32.9% year-to-date in September compared to the year before.

The drop in investor activity was greater than the decline seen in overall activity in the housing market during the same period, which fell 25%.

From January through September last year, investors bought an average of 10.8% of the houses sold each month, down from 12% during the same period in 2022 but still higher than pre-COVID levels, the study found.

The share of inventor buyers peaked in February 2022 at 13.1%.

When housing demand skyrocketed and rents surged early in the pandemic boom, larger investors edged out smaller investors.

Large investors made up 22.3% of investment purchases in January 2020, and their share grew to a high of 34.1% of home purchases in October 2021, which the analysis said could have driven the surge in cash deals during that time due to access to equity.

For perspective, in 2021 and 2022, around 80% of large investors purchased properties with cash. However, large investors are continuing to pull back amid less-certain conditions in the housing market.

“Investors took a step back in 2023 as high prices, high mortgage rates and falling rents made investment less appealing,” senior economic research analyst Hannah Jones told FOX Business. 

A shortage of homes for sale continues to drive prices higher, and while interest rates have eased some last fall, they remain well above the pandemic-era lows of 3%. 

The median sales price for a home in the U.S. jumped 4.4% in December to $363,371, according to Redfin data, while the latest Freddie Mac data shows the average 30-year fixed-rate mortgage is at 6.66%.

“We expect housing affordability to improve slightly in 2024, but the market will remain relatively unaffordable, meaning it is unlikely that investor activity will pick back up to pandemic-era levels,” Jones said.

FOX Business’ Daniella Genovese contributed to this report.

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