Investors bought a record 26% of the affordable houses in the US last quarter

• US property investors snapped up 26.1% of low-priced homes in the fourth quarter, a record share.
• Affordably priced homes are scarce in the US, as inventory remains low in much of the country.

A lot of people want a cheaper home, but they're hard to come by in this market.

Homebuyers looking for an affordable house or a so-called starter home might be crowded out a bit by investors who are also on the hunt.

Redfin reported on Wednesday that property investors snapped up 26.1% of low-priced homes that were for sale in the fourth quarter, hitting a record share.

Zooming in, low-priced homes accounted for 46.5% of investor purchases, with mid-priced homes at 24.6% and high-priced homes at 28.8%.

"I get tons of emails every day from investors looking for properties, but of course, they only want homes that are under market value, which are hard to come by. When they find those properties, they pile in," said Carrie Caruthers, a Redfin Premier real estate agent in California, adding that she has also observed an increase in foreclosures, which also draw big demand from investors as they tend to be cheaper than other homes on the market.

Like everyone else looking to buy a house in 2024, investors want to buy cheap if they can, but affordable homes are scarce. Inventory is still low across the country as sellers cling to lower mortgage rates they locked in years ago.

Investors' overall home buying dropped 10.5% in the fourth quarter to 46,419, the lowest fourth-quarter volume since 2016.

"If the Fed cuts interest rates later this year as expected, we may see more investors wade into the housing market," said Redfin Senior Economist Sheharyar Bokhari.

The research also found that single-family homes accounted for more than two-thirds of investors' purchases, at 68.6%, followed by condos or co-ops at 19.2%, and multifamily properties were the least popular, at only 5.1%.

Escalating mortgage rates have posed significant hurdles for prospective homebuyers, while prices also remain elevated in most market. The 30-year fixed mortgage rate surged climbed in the last week to 6.87%, representing the highest level since early December 2023.

At the end of 2023, Democrats in Congress proposed bills aimed at limiting big investors' participation in the housing market in order to help affordability. It's worth noting though that big institutions make up a small percentage of investors in the market buying homes.

According to data from the Department of Housing and Urban Development, institutions accounted for just 3% of all home purchases in 2021, and the major investor money behind the US homebuying spree in recent years has been so-called mom-and-pop buyers.