According to a Redfin Corp (NASDAQ:RDFN) analysis, investor home purchases nationally decreased by 30.2% year over year in the third quarter, the biggest drop since the start of the pandemic.

The Data: With the exception of the beginning of the pandemic, the quarterly decrease in investor purchases was the highest ever recorded at 26.1%.

This contrasts with a quarterly decline in home purchases overall of 17.4%.

Read also: This Type Of Home Took Nearly 30% Of All Home Sales In The Third Quarter

Due to their increased reluctance to make purchases, investors lost market share for the second consecutive quarter.

In the third quarter, they purchased almost 65,000 properties in metro areas, or 17.5% of all homes bought. This is lower than the second quarter's 19.5% and the year prior's 18.2%, but it's still slightly higher than the 15% prior to the pandemic.

Investors spent $42.4 billion on homes in the third quarter, a decrease of 26.3% from $57.6 billion a year earlier and a reduction of 30.5% from $61 billion in the second quarter, according to Redfin.

The average cost of a home bought by investors was $451,975, up 6.4% from a year ago but down 4.3% from a quarter ago.

What That Means For The Market: Due to the potential for significant home price drops, real estate investors are pulling back on fears of a loss in their investment.

Housing prices are rising just 3% nationwide year over year, which is the lowest annual growth rate since 2020. In several major cities, they are already down from a year ago.

Due to the high interest rates, financing is incredibly costly, which makes investment less alluring as it reduces returns. Additionally, decreasing rent growth makes it harder for investors who are landlords to generate significant returns.

However, investors aren’t backing out all the way and you don’t have to be a landlord to make money in the housing market.

Some are investing in rental properties, and are building wealth over the long term — here’s how you can grab a piece of the rental market with as little as $100 and earn passive income.

“It’s unlikely that investors will return to the market in a big way anytime soon. Home prices would need to fall significantly for that to happen,” said Redfin Senior Economist Sheharyar Bokhari.

To read about the latest developments in the industry, check out Benzinga's real estate home page.

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