CoreLogic Expects iBuyer Home Investment to Slow
Investors are struggling to resell the homes they have purchased.
CoreLogic reported that investor purchases of homes in Q4 “held steady” after falling by 21% in June and then rebounding to 26% in September, but the real estate analyst firm expects iBuyer activity to continue to decline this year because iBuyers are struggling to resell the homes they purchased.
Only 30% of such homes bought in June were resold by the end of the year, CoreLogic reported, “a clear sign that 2022’s mortgage rate hikes caused decreased demand from traditional buyers,” it said.
The business plan for most iBuyers is to flip homes, being reliant on home price appreciation, but that expectation has waned.
February marked the first year-over-year decline in home prices in more than a decade.
Sales levels show that the market in Q4 2022 “plummeted” in the fourth quarter, CoreLogic said.
During this period, investors purchased on average 81,000 homes, a 25% decline in activity compared with Q4 2021.
“However, fourth-quarter purchases align with the levels of investor activity seen in 2019 and 2020,” CoreLogic’s economist Thomas Malone wrote.
“Owner-occupied purchases, on the other hand, are well below the levels seen during those years. Overall, it appears that housing demand declined for both investors and owner-occupied buyers fairly evenly, with both likely deterred by high prices and elevated interest rates.”
Renting these homes is another option for the iBuyers, but rent growth in the SFR niche is slowing, too, meaning that most investors likely perceive holding properties to be a more favorable strategy than selling.