Despite the rate cut, mortgage rates remained high, attracting cash-rich investors to the housing market. Despite falling prices in some areas, properties for sale are still profitable. Cities like San Jose and Denver are seeing investor interest, while Oakland and Providence have declined.
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Even though central banks have lowered interest rates, mortgage rates have not followed suit. The 30-year average period is still around 6.21%.
Still, the latest data available from Redfin shows an increase in buyers, especially investors, in the second quarter. The percentage of investors who purchased real estate increased by 3.4% from the previous year. They were likely drawn to the opportunity to meet growing demand from renters who face barriers to homeownership due to a lack of affordability and rising mortgage rates, according to Lily Katz’s memo. It seems that.
According to CoreLogic, housing prices nationwide (including non-performing sales) rose 4.3% in July compared to the same month last year. Investors bought one in every six properties sold and one in four affordable housing units worth $43 billion in the second quarter, Katz said.
An investor, as defined by the real estate data company, is a buyer whose ownership code on the purchase deed includes an association, corporate trustee, company, joint venture, or corporate trust, and who is less dependent on debt than the average buyer. is low and not sensitive to interest rates. . Most (69%) pay in cash or make a large down payment. That means they can take advantage of the lack of competition.
Cities that are attracting increased investor interest include San Jose, California, Portland, Oregon, and Denver, Colorado. Meanwhile, purchases were down in places like Oakland, Calif., and Providence, R.I., with median capital gains down 20% and 37%, respectively.
The chart below shows the change in investor purchases over the past 20 years. It has shown an increase in the years following the bursting of the housing bubble and the post-pandemic.
red fin
But whether buying or selling, investors are doing very well when it comes to capital gains, said Elijah de la Campa, senior economist at Redfin. This was not the case in the years leading up to the housing crisis, when property owners were losing money on sales.
“We still think there is an opportunity to make a profit on the investment, and with a price increase of 30%, 40% year-on-year, we can make quite a profit,” de la Campa said. “Things may become more difficult in certain locations, but overall it looks like there are still plenty of opportunities for you as an investor to make money buying and selling homes.”
He added that even cities where capital gains have retreated from a year ago are still profitable when they sell. They’re not going to get as much money as they did last June.
Below is a list of 39 major metropolitan areas ordered by descending median capital gains over the past year through June. What stands out most to De La Campa is that many of the areas with the highest capital gains are affordable, particularly Philadelphia and Warren, Michigan.
