60% of Builders Report Selling Homes to Investors

By Jody Kahn and Cara Lavender

Key takeaways

• We introduced our Investor Activity rating in May, revealing a Slow market for investors.
• 60% of homebuilders indicated they sold homes to investors from February through April, while 40% reported they didn’t sell to investors.
• Investors now represent 25% of new and resale residential transactions.

Homebuilders who reported investor sales from February through April noted sales mainly to mom-and-pop investors or second-home buyers. Investors represent 25% of combined and resale residential real estate transactions, up from 12% in 2002. (Check out this recent article on investor trends over the past few decades.) Leveraging insights from our national surveys of homebuilders and real estate agents, we explore regional differences and market dynamics influenced by various investor types.

Breaking down the investor ratings

Homebuilder Survey results

Nationally, 40% of homebuilders did not sell to investors. Among those builders who sold homes to investors, 28% reported Normal sales volume, while 26% experienced Slow to Very Slow sales in the past 90 days. Regional highlights include:

• California: 18% of Southern California builders and 17% of Northern California builders reported Strong investor sales volume.
• Florida: 6% of Florida builders reported Very Slow investor sales volume, and 29% indicated Slow sales.

Real Estate Agent Survey results

44% of agents nationwide reported Slow to Very Slow investor activity. Regionally, agents’ observations align with homebuilders, showing stronger investor activity in California and weaker activity in Florida.

Who’s driving the investor market?

Builders and agents indicate that mom-and-pop investors (who own 1–9 investment properties)?dominate the market, though this varies by region.

New home investor breakdown

Among builders that sold to investors in the past 90 days:

• 69% sold to mom-and-pop investors.
• 27% sold to second or vacation-home buyers, especially in the Northwest, Southern California, and Florida (where vacation or second homes account for more than half of investor sales).
• Institutional investors (who own 10+ investment properties) accounted for just 4% of investor sales nationally but 20% in the Northeast.

Builders reported selling to investors at less than a 1% discount compared to retail pricing, though Northern California and Texas builders reported slightly steeper discounts, nearing 2%.

Resale listings investor breakdown

Agents reported that 70% of new listings in the past 90 days were primary residences. However, listings from investors and estates have increased since November 2023, especially in Florida and California.

In spring 2024, investors accounted for 11% of new listings, up from 9% in November 2023. Most were mom-and-pop investors, followed by fix-and-flip operators. Institutional investor listings remained low at 1% nationally, ranging from 2% in the Southeast to 0% in Northern California.

Based on builder and resale agent input, our research team analyzes investor types and current market conditions. Although investor activity is currently low (excluding second-home buyers), this trend may shift. Second-home buyers might list their properties and cash out their investments if the economy weakens. During economic downturns, some investors seek discounts and become more active buyers, while second-home buyers often want to turn their equity into cash. A high volume of listings could weaken home prices, affecting market dynamics.?

Understanding these patterns helps us anticipate potential market changes and prepare for the future. Keep an eye on the Investor Activity rating in our Homebuilder and Resale Agent surveys for real-time updates on the investor market.