The New Hot Spots for Home Investors

AUSTIN — (By Dale King, Realty News Report) – A new report from Realtor.com says investors are keenly aware of economic growth and housing demand when they acquire houses for investment purposes. That’s why they purchase certain homes in specific areas, anticipating a meaningful financial return, says the analysis found in Realtor.com’s Investor Report Midyear Update.

The investor report says investors seek bargains at both the high and low ends of the real estate spectrum. They are willing to pay steep premiums for homes in high-cost areas and also capitalize on affordability of lower-priced regions by snapping up deeply discounted properties. Done right, either choice can pay off.

Not only that, while large and small investors compete against each other for feasible purchases, they also contend with regular folk searching for median-price houses to call their own. Entrepreneurs usually come out ahead in that fray.

“Even as investors pull back from pandemic-era activity, they face fewer headwinds than many typical buyers,” said Danielle Hale, chief economist at Realtor.com

“With affordability still stretched and inventory tight, many would-be buyers remain sidelined, giving investors a larger share of the market and, in some areas, more influence over prices. As a result, investor activity can amplify price pressures, especially in markets where their purchases concentrate on already competitive price ranges.”

Long-haul challenge

Investor competition has been a growing challenge for many hopeful homebuyers, one that reached new heights during the COVID-19 pandemic. With limited inventory, buyers often found themselves competing directly with investors for a small array of available homes.

Since then, the housing market has changed markedly, Hale said. Inventory levels in many areas have returned to or exceeded pre-pandemic norms while price growth has moderated and rent increases have slowed. As of the first half of 2025, investor activity remained relatively steady compared with a more active 2024.

Investors grasp varies

In states such as Montana, Utah and California where housing affordability faces the most intense struggle, investors are willing to fork over purchase prices reaching as high as 35% above the asking price for a typical local home.

Investors seeking dwellings in more affordable states like Michigan, Maryland and Virginia are targeting lower-priced homes, sometimes paying as much as 50% below the asking price of conventional residences.

Realtor.com says overall home sales declined 4.2% in the second quarter of 2025 compared with the same period a year earlier, but investor purchases dropped off only 2.7%, giving them a greater presence and more clout in a smaller market.

Willing to pay big

In five Western and coastal states, investors paid far more than typical buyers to acquire residences. In Montana, the median investor purchase price was $574,000, 35.1% higher than the state’s median sale price) followed by Utah ($667,000, 33.7% over median sale price), California ($909,000, 23.3% over median sale price), New York ($554,000, up 12.3% from median sale price) and Vermont ($382,000, 3.2% over median sale price).

Among major metros, investors paid the largest premiums in Los Angeles (+19.8%), San Diego (+9.2%), New York City (+8.7%), San Francisco (+6.8%) and Nashville (+3.4%), where rental demand remains strong and affordability constraints continue sidelining typical buyers.

Some discounts exceed 50%

Investors in more affordable states aim for lower-priced properties. The largest gaps between investor and overall median purchase prices were seen in Michigan (-53.1%), Maryland (-45.4%), Virginia (-45.0%), Delaware (-41.4%) and Wisconsin (-40.7%).

The discounts show that investors are targeting lower-priced homes and entry-level properties which often provide the best rent-to-price ratios and long-term income potential.

At the metro level, investors found the steepest discounts in Detroit (-58.0%), Pittsburgh (-52.7%), Baltimore (-52.0%), Cleveland (-51.4%) and Milwaukee (-50.1%), markets that combine affordable housing with stable rental demand and opportunities for renovation.

Affordable markets most attractive

Overall, investor participation remains concentrated in affordable, high-demand regions. Missouri (18.9%), Mississippi (17.1%) and Nevada (15.4%) recorded the highest share of home purchases by investors looking to enlarge their property grouping, followed by Indiana (14.3%) and Alabama (14.2%).

Among the 50 largest U.S. metros, Memphis (25.2%), St. Louis (20.6%) and Kansas City (19.3%) led the nation in buyer share by investors followed by the San Antonio region (18%), Birmingham, Ala. (17.6%), Las Vegas (16.8%), Columbus, Ohio (16.4%), the Dallas metro (16.1%), Oklahoma City (15.5%) and Indianapolis (15.1%)

Investors bought more homes than they sold

In the second quarter of 2025, investors accounted for 10.8% of all home purchases, up slightly from 10.7% a year earlier and just below the 2022 peak of 12.1%.

During the first half of this year, investors bought roughly 41,000 more homes than they sold, a wider gap than the same period last year as selling activity slowed. Realtor.com says “this wider gap means that investor competition with buyers has intensified.”

Investor strategy split

“We’re seeing a clear split in investor strategy,” said Hannah Jones, senior economic research analyst at Realtor.com. “Some investors are doubling down on affordability and rental yield while others are willing to pay a premium for markets with persistent housing shortages and strong rental demand.”

The report says “both methods reflect confidence that housing demand — and rent potential — will remain strong over time.”

Key highlights

Investor home sales fell 4.1% in Q2, marking a clear slowdown from last year’s rapid pace.
Investor sellers accounted for 9.2% of all home sales in Q2 2025, unchanged year over year.
The small share of small investor buyers continues to grow while large investor activity is dropping off, a trend that started in 2022 and has continued through the latest data.
The net impact of investors shifted slightly more to the buy side year over year in Q2 as investor selling activity pulled back more than investor buying activity.

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