Why Investors Keep Buying Homes Despite Still-High Mortgage Rates

Investor sales rose to 21% of all existing-home transactions in August. (Justin Sullivan/Getty Images)

Key Points

• Investor purchases of existing homes increased to 21% of all transactions in August, the highest share since early 2024.
• The overall sales pace of previously owned homes decreased by 0.2% to a seasonally adjusted annual rate of 4 million.
• Medium-sized investors, owning 10 to 99 properties, were the only investor type to increase their market share in the second quarter.

Everyday home buyers might not be flocking back into the housing market—but investors are holding strong.

Sales of previously owned homes, which comprise the majority of the housing market, were about flat with the month prior in August, according to recent National Association of Realtors data.

The overall sales pace dipped 0.2% to a seasonally adjusted annual rate of 4 million, the trade group said. While first-time buyers held at a relatively low 28% of purchases, another corner of the market gained share.

Non-primary residence purchases, a category commonly referred to as investor sales, rose to 21% of all existing-home transactions in August, NAR data show. These buyers, which include both those buying homes as rental properties and as vacation homes, represented the greatest share of all purchases since early 2024, according to the Realtors report.

Economists point to a couple of possible reasons. Investors pay less mind to mortgage rates, notes Thom Malone, an economist at real estate data and analytics firm Cotality, formerly CoreLogic. “They are much more likely to pay with all cash, so they’re not as sensitive to interest rate increases,” he says.

Fixed 30-year mortgage rates, at a recent weekly average of 6.3%, according to Freddie Mac, are neither near the multidecade highs approaching 8% seen in late 2023, nor below 6%, which economists frequently say represents an important psychological barrier for buyers. Costs have eased this year, though they remain prohibitive for many relative to the years before the pandemic.

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Today’s tough environment for home sales might actually incentivize some investor purchases, notes Realtor.com senior economist Jake Krimmel. “Consumers who would be buying homes might be staying as renters for longer,” he says. “Those are exactly going to be the potential customers for these investors.” (Both Barron’s and Move, which operates Realtor.com, are owned by News Corp.)

Investors could be looking ahead to expectations of lower mortgage rates next year—and the ensuing increase in competition for homes that could come with it. Fannie Mae’s most recent forecast calls for mortgage rates to fall to 5.9% by the end of 2026, down from an expected 6.4% at the end of this year.

“Investors are often driven by the numbers and base their decisions purely on the potential rates of return,” National Association of Realtors chief economist Lawrence Yun noted to Barron’s. “With additional Federal Reserve rate cuts expected, investors may sense the desire to enter the market before others.”

It isn’t big firms driving investor purchase activity, says Cotality’s Malone. Medium-size investors—those who own as few as 10 or as many as 99 properties—were the only type of investor to grow their market share in Cotality’s most recent report, which covers the second quarter.

The explanation is something of a Goldilocks scenario. The smallest investors, who might use a mortgage to purchase a home, are subject to the same financing headwinds as owner-occupants, Malone says. Larger investors, meanwhile, tend to have more diversified portfolios—and might not expect home values to appreciate at the same pace they used to.

But medium-size investors are more likely to pay with all-cash than smaller investors, and are less diversified than the biggest players. “If things are getting unaffordable and prices aren’t going up, the conditions are kind of set that if someone is going to step in to fulfill rental demand, it would be them,” he says.

No matter the driver, the uptick in investor purchase share is a good sign for investors in home builder stocks who have been waiting for supply to thin out, Wedbush analyst Jay McCanless wrote Friday. Home builders have been offering incentives and price reductions to keep houses selling, at the expense of their margins.

“For investors and analysts concerned about rising inventories in all for-sale housing types, we think this lift in investor sales and the corresponding impact on competitive supply will see this as an incrementally bullish signal,” McCanless wrote.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com