Investors have soured on DC housing market, but still like Baltimore

Home sales to investor buyers nationwide in the first quarter were down 48.6% from a year ago, the largest annual drop on record.

Investors buy residential properties either to resell them, or to rent them, and higher interest rates, stalled rents and elevated housing prices are all eating into potential profits, according to real estate firm Redfin.

Nationwide, investor buyers accounted for 18% of first quarter sales.

Among the metropolitan areas tracked by Redfin, the D.C. region tied for the lowest share of investor buyers in the first quarter at just 10.6%.

Investors don’t buy homes with the intention of losing money, but Redfin reports that 13.5% of homes sold by an investor were sold for less than the investor paid for it in March. In Phoenix, 30.7% of homes sold by investors in March sold for a loss, the largest share among metros.

Home prices are considerably higher in D.C. than they were a few years ago, and considerably higher than they are in some other comparable markets, making it increasingly less attractive to investors. But Redfin said D.C. itself is also less attractive to investors who intend to rent the property.

“I hear from our agents that D.C. has laws that are more on the tenant side than the landlord side, so that also might be affecting landlord appetite to get into the D.C. market,” said Redfin chief economist Daryl Fairweather.

On the other hand, investors still favor the Baltimore market. Home sales to investors in Baltimore in the first quarter posted the smallest annual decline of any large metro, down just 8.8% from a year earlier.

“Baltimore is more affordable than D.C. If you can buy two properties for $300,000 each versus buying one for $600,000, the two properties are going to lower your risk,” Fairweather said.

Even with the steep annual decline in sales to investors, such sales remain higher than they were before the pandemic. The first quarter of 2023 was compared to what was an extremely strong quarter for investment buyers in the first quarter of 2022, which was near a record high.

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Jeff Clabaugh

Jeff Clabaugh has spent 20 years covering the Washington region's economy and financial markets for WTOP as part of a partnership with the Washington Business Journal, and officially joined the WTOP newsroom staff in January 2016.

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