By Aarthi Swaminathan
Individual investors and second home buyers accounted for 1 in 5 home purchases in September – the highest share in just over a year.
While mortgage rates above 7% are prompting everyday house hunters to exit the market, data suggests real estate investors are holding on.
In June, real estate investor Justin Smith closed on a duplex in Roscoe, Illinois — about 90 miles west of Chicago — for $250,000. The rate on his 30-year fixed mortgage was 7%.
Smith, a 34-year-old real estate broker who also owns three apartment buildings in Roscoe and nearby Rockford, told MarketWatch that small Midwestern towns in particular offer an easy way to invest in real estate because the barrier to entry — namely housing prices — is relatively low. The average home value in Rockford, Illinois, is about $185,000, according to Zillow (Z) (ZG) estimates, compared to a national median value of about $366,000.
More importantly, “we have a high renter population,” Smith said, meaning many people in the area are renting instead of owning.
Smith isn’t the only real estate investor buying right now. As rising mortgage rates of more than 7% prompt everyday house hunters to exit the market, data suggests real estate investors are holding on.
In September, individual investors and second-home buyers accounted for 20% of home purchase transactions, the highest share in just over a year, according to the National Association of Realtors.
“Investors tend to exit less than non-investor buyers when conditions deteriorate,” Hannah Jones, senior economist at Realtor.com, told MarketWatch. “Their share of total buyers is increasing as higher mortgage rates weed out more non-investor buyers.” (Realtor.com is operated by Move Inc., a subsidiary of News Corp; MarketWatch publisher Dow Jones is also a subsidiary of News Corp.)
“There are opportunities for investors today that we haven’t seen in years. Inventory is rising, sellers are lowering prices and the negotiating leverage is shifting toward buyers,” Michael Carbonare, another real estate investor, told MarketWatch.
In September, the total inventory of homes for sale in the United States jumped to 1.6 million units, the highest level since November 2019, the NAR reported. About 43% of sellers were reducing their prices as of October 12, according to separate data from ParclHQ.
“Now is a good time to seek out motivated sellers, buy correctly and structure transactions that make financial sense,” Carbonare said.
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Relatively small real estate investors – those who own between three and nine properties – have been more active than larger landlords. About 14.5% of home purchases made in August were made by small real estate investors, up from 13.6% a year ago, according to Cotality, a real estate data analytics company.
In contrast, 9% of purchases were made by medium-sized investors and 2% by large investors.
One of the factors leading some investors to buy homes now is the high demand for rental housing. Rents nationwide are trending upward: In September, the typical rent rose 2.7% from the same period last year to around $1,900, Zillow found in an analysis.
“High mortgage rates have pushed home buyers straight into the arms of renting,” Kara Ng, senior economist at Zillow, said in the report.
The company estimates that demand for single-family rentals increased nearly 22% in September from a year earlier, and 10% for multi-family or apartment rentals.
In Chicago, where the average rent rose 4.7% in September from last year to about $2,200, according to Zillow, Tom Moran, 66, is putting aside $500,000 for a $2 million, six-unit apartment building in the city — the latest addition to his portfolio of 18 other buildings.
The mortgage rate was 6.625 percent for the bank loan Moran used to finance the purchase, although he said the rate wasn’t a concern for him. “It’s just a number,” Moran, a real estate investor and broker who is now under contract on the property, told MarketWatch.
“Interest rates go up, interest rates go down, but in general real estate is a long-term purchase,” he said. “I view real estate as a small business…so I don’t worry about the initial return.”
Having purchased his first property in the late 1980s, when 30-year mortgage rates averaged over 10%, Moran said he was accustomed to high-rate environments.
As part of his due diligence before his latest purchase, Moran called a few mortgage lenders to get quotes before pulling the trigger. The rates he was quoted ranged from 6% to more than 7%, but he said he was unfazed.
“People panic” when they see the 7% handle, Moran noted. On the loan he requested, the quarter-point rate increase, from 6.875% to 7.125%, represented a loss of approximately $250 per month for him. “It’s not a deal breaker,” he said.
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-Aarthi Swaminathan
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently of Dow Jones Newswires and the Wall Street Journal.
(END) Dow Jones Newswires
10/19/26 9:33 a.m. ET
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