So much for residential real estate properties producing practically guaranteed returns for investors year after year, no matter what.
U.S. investor home purchases dropped 6% year-over-year in Q1 2026 to their lowest level since 2020, when the start of the pandemic put a major crimp on homebuying. Prior to 2020, the last time investors bought so few homes was in 2016.
A new report from Redfin has also found that real estate investors’ market share was 19%, largely unchanged from a year earlier, reflecting the overall sluggishness of the U.S. housing market in the first quarter. When investors buy fewer homes, there are fewer homes to sell. Investors had 7.8% of all listings, the smallest share in five years.
Redfin defines an investor as any institution or business that purchases residential real estate, so the report covers both institutional and mom-and-pop investors.
Investor home purchases declined in Q1 mainly due to elevated housing costs squeezing potential returns. While mortgage rates were slightly lower in the first quarter than recent peaks, dipping into the low-6% range from near 7% throughout 2025, they’re still double pandemic-era lows.
Home-sale prices are also going up in most of the country, so it’s more expensive for investors to buy properties, and reduces the profitability of rental properties and flips.
A less than robust housing market is also playing a role. Home-price growth has slowed in much of the country, and in some markets prices are falling. Thus, investors worry whether homes will quickly rise in value. Additionally, rising insurances, taxes and home maintenance costs cut into margins, particularly for smaller investors.
Investor gains are also down. The median capital gain for a home sold by an investor was $196,618 in Q1, up 5.3% year-over-year. But that pales in comparison to the double-digit gains common in 2020 and 2021.
“Higher mortgage rates, slowing price growth and rising construction costs are giving both investors and individual homebuyers pause,” said Tamara Mattox-Kabat, a Redfin Premier agent in Denver. “Flippers and investors are scaling back, and being much more strategic when they do buy homes. They’re buying less expensive materials, and being more careful about timing their projects to list during the stronger spring and summer seasons. It’s also noteworthy that large institutional investors are focusing more on building new homes than buying existing ones.”
