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Investors pullback from markets like L.A., while diving into places like Milwaukee

Investors are notably stepping back from high-cost markets, finds Parcl Labs

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Parcl Labs, a fast-growing residential real estate analytics firm, continuously examines home sales across the nation to uncover the markets witnessing a surge in investor activity and those from which investors are retreating. Parcl Labs' analysis produces a metric they call the "Investor Purchase to Sale Ratio," which is designed to quantify investor participation in the largest housing markets across the nation.

Here's how to interpret the “Investor Purchase to Sale Ratio”, according to Jason Lewris, co-founder of Parcl Labs: “A 1.00 here would represent for every investor [home] purchase, there was 1 investor [home] sale, so 1:1 harmony. Anything above 1.00 would indicate investors are purchasing more units than selling and under 1.00 would be the inverse.”

This updated analysis is through December 2023.

In the wake of the ongoing mortgage rate shock, investors have altered their strategies since 2021, leading to marked shifts in regional housing markets.

On an aggregate basis, investors are pulling back in housing markets such as San Francisco, San Jose, Riverside, San Diego, and Los Angeles, according to Parcl Labs. It’s hard to find positive cash flow in these pricey markets right now.

While on an aggregate basis, investors are buying up more in housing markets like Indianapolis, Philadelphia, Denver, Milwaukee, St. Louis, Atlanta, and Columbus, Ohio, according to Parcl Labs. Depending on the property type and area, there’s still positive cash flow to be found in these markets.

Big picture: Unless mortgage rates pull back sharply, the investor side of the housing market (especially on the institutional side) will likely remain constrained in 2024, even more so in high-priced West Coast markets.

This week, ResiClub PRO members will get updated access to the Lance Lambert Inventory Tracker and the Lance Lambert House Price Tracker. They include metro and county level analysis.