Redfin reports MASSIVE Investor Crash (46% DECLINE in Purchases)

Redfin is reporting that Real Estate Investors are abandoning the Housing Market. Investors bought 46% fewer homes in the fourth quarter of 2022 compared to a year earlier.

Especially in markets like Phoenix, Las Vegas, Atlanta, and Charlotte. Where the declines were over 60%. This is great news for regular homebuyers as they gain a bigger share of the home purchases at the expense of Wall Street Investors buying less.

Why are Wall Street Investors buying less? Because they are running out of money. Data from Finsight shows a huge decline in Mortgage Backed Security (MBS) issuance to Wall Street Investors. From 2020 to 2022 they raised $32 Billion to buy houses. Over the last quarter only $3 Billion.

But there's still a big problem in the US Housing Market. And it's that regular homebuyers also aren't buying many homes. Mortgage Purchase Applications to buy a house, data from the Mortgage Bankers Association, are down a massive 36% YoY. And are at their lowest levels since 2010, the middle of the last Housing Crash.

Now - everyone blames this Housing Downturn so far on Jerome Powell hiking interest rates. And the higher Mortgage Rates that result. But zooming out it's important to realize that the Housing Cycle last 15 years. And we are likely in the first year of a new Housing Cycle. Where prices will decline, and buyer demand will be subdued, for multiple years.

Realtors especially don't want to acknowledge this reality. Many of the 1.6 Million Realtors in America are saying that now is a "good time to buy" despite Mortgage Rates being 6.5% and home prices still being near all-time highs. I believe many of these realtors know they will need new jobs soon.

If you are a homebuyer looking to buy in 2023, it's important to make decisions based off the data. One data point I look at consistently is House Payment / Median Income Ratio. This shows you how cost-burdened local homebuyers are. In Housing Markets like California, Utah, and Washington, the typical buyer needs to spend over 50% of their income on Housing Costs. Which makes it no surprise that these markets are the ones declining first.

Meanwhile, midwest states such as Iowa and Oklahoma have a much lower Payment / Income Ratio. And thus are unlikely to have as big of a Housing Crash in 2023.

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