By Giulia Carbonaro
Senior Reporter
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Home purchases by investors plunged 6 percent year-over-year nationwide in the first quarter of 2026 to their lowest level since 2020, just as lawmakers were advancing legislation promising to limit their presence in the country’s residential housing market.
Investors—both institutional and mom-and-pop investors—bought a total of 45,397 homes in the U.S. between January and March, the lowest number since the pandemic brought home-buying to a temporary halt, according to a new Redfin report.
Before that, based on an analysis of county-level home purchase records across 39 of the most populous U.S. metropolitan areas going back to 2000, the last time investors bought so few homes in the U.S. was in 2016.
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Investors’ condo purchases fell by an even steeper 8 percent year-over-year, dropping to the lowest first-quarter level since 2015 as condos have become less desirable housing options because of higher fees and insurance costs.
Why Are Investors Buying Fewer Homes?
Investors are backing out of the housing market because the potential of making returns on their purchases has shrunk in recent months because of higher housing costs, a cooling rental market and a sluggish housing market nationwide.
The median capital gain for a home sold by an investor in the first quarter of 2026 was $196,618, up 5.3 percent from a year earlier. Out of context, this is still a win for investors. But considering that in 2020 and 2021 investors were often making profits in the double-digits, it is easier to see why they are losing motivation to buy.
In the first quarter of the year, mortgage rates were slightly lower than their most recent peaks following the start of the war in Iran, with the average 30-year fixed-rate mortgage dipping into the low-6 percent range between January and March after hovering around 7 percent throughout last year.
Despite this slight improvement in affordability, borrowing costs are still nearly double what they were during the pandemic home-buying frenzy, when investors’ activity exploded.
Another thing that has changed dramatically since then is the price of homes. Home prices nationwide are up by over 60 percent since 2019, based on J.P. Morgan data, and they are still rising. This makes it more expensive for investors to buy properties, while reducing the profitability of renting them out and flipping them.
In April, according to Redfin data, the median asking price of a typical U.S. home was up 1.4 percent year-over-year, at $403,140, while the median sale price was up 2.2 percent at $398,653.
On the other hand, the vertiginous home price growth that took place after the pandemic has significantly slowed down over the past year, as affordability issues have kept many buyers to the sidelines of the market. But this is also bad news for investors, as it gives them less confidence that homes will rise in value and they will be able to make a profit out of their purchases.
Higher property taxes, rising homeowners association (HOA) fees and insurance rates weighing heavily on many Americans’ finances are also cutting into investors’ margins, making home-buying less appealing.
On top of all these factors, there is the growing economic uncertainty surrounding the impact of the Iran war on the U.S. economy, which Redfin experts say might be leading investors to preserve cash right now rather than expand their real estate portfolios.
Where Are They Buying—and Where Are They Backing Away?
Investors’ home purchases saw the biggest drop in Detroit, where they fell 35 percent year-over-year in the first quarter of the year.
The next-biggest decline was in Orlando, where they fell 25 percent year-over-year.
Investors have been turning their back on Florida since the end of the pandemic, as the Sunshine State’s housing market has been experiencing a stark price correction with return-to-office orders. Inventory has surged, HOA fees have risen as a result of new safety legislation and insurance costs have been climbing for years because of the growing threat of natural disasters.
The third-biggest decline was reported by Cleveland, where investor purchases fell 21 percent year-over-year.
Investors’ home-buying activity was concentrated in some of the hottest housing markets in the country, where a purchase is more likely to make returns.
The biggest share of homes purchased by investors was reported in San Francisco (19 percent), followed by Virginia Beach (15 percent) and San Jose (12 percent).
What Role Do They Play In the Market—And How Is That Going To Change?
While investors’ purchases fell significantly in the first quarter of the year, they still bought one in five homes in the U.S. market during that same period. The vast majority of their purchases were single-family homes (70 percent), followed by condos (18 percent) and townhomes (7 percent).
However, when it comes to institutional investors—the category targeted by the new housing package passed by both Senate and House this year—their presence in the U.S. housing market is actually smaller than many would think, experts say.
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The 21st ROAD to Housing Act, which passed the House on May 20 after making it through the Senate, aims to prohibit large institutional investors from purchasing certain single-family homes in the U.S." to promote homeownership opportunities for American families, not corporations."
This is in line with what President Donald Trump has been urging lawmakers to do. The president has accused Wall Street investors of "stealing away" the "American Dream" from everyday people.
But institutional investors, defined typically as entities owning more than 1,000 properties, play "a very small role in the U.S. housing market," Daryl Fairweather, the chief economist at the real estate brokerage Redfin, previously told Newsweek.
They own less than 1 percent of the total single-family housing stock in the U.S., she said. That is a lot less than their 2021 peak, although even then they were behind only for a small fraction of total home purchases.
"Most investors are actually small-scale landlords," Fairweather said. "About 92 percent of investor-owned single-family homes are held by people owning one to five properties."
The American public and politicians are looking at Wall Street "as the easy scapegoat" for the ongoing housing affordability crisis in the U.S., Fairweather said. "But it’s the lack of housing that is driving up prices and making homes an attractive asset for investors."
Banning large institutional investors "will have little impact on the national housing market," she said.
Redfin/Newsweek
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