Small investors now dominate investor home purchases

Paradox

Last week, our latest inflation reports, both the CPI and PPI, showed inflation surging. Yet mortgage rates actually fell instead of rising. 

Why?

In our first story, I unravel the paradox and explain what drove mortgage rates lower. 

Along the way, I look ahead to next week’s Federal Reserve meeting. Will it raise interest rates again, or not?

Make sure to check back here next Wednesday, when I will give you a full breakdown of the Fed’s decision, all the fallout from the meeting, and what it means for our industry.

- David

What to expect from next week’s Fed meeting 

On October 14, a hotter-than-expected inflation report briefly pushed the 30-year fixed mortgage rate to 7.56%, according to Mortgage News Daily. By the next day, it had fallen to 7.33%. Inflation hadn’t cooled, so why did mortgage rates fall?

The answer lies in Wall Street’s growing anxiety over artificial intelligence. Investors began doubting whether AI companies could earn enough to justify the enormous sums being invested in them. As a result, they sold many of their AI stocks and began buying U.S. Treasuries.

That demand pushed Treasury prices up and yields down. Mortgage rates, which tend to follow longer-term Treasury yields, fell with them.

That shift, along with signals from Fed officials that they’re in no rush, helps explain why most economists and markets expect the Fed to hold off on raising rates next week, even with inflation running hot.

Here are the key points to know:

• Economists expect a hold: In a Reuters poll, 94 of 100 economists expect the Fed to keep its benchmark rate at 3.75%–4.00% at its October 27–28 meeting.

• So do markets: Futures put the odds of an October hike at just 15% as of last Friday, according to CME FedWatch.

• A December hike is likely: All 100 economists in the Reuters poll expect a hike in December, and 38 of 92 see at least two more increases ahead.

• One wild card: Fed Chair Kevin Warsh has refused to signal decisions in advance, so a surprise can’t be ruled out.

• Housing is feeling the squeeze: Fannie Mae expects 30-year rates to hover around 7.5% through 2027, a far cry from the 6% forecast for next year as recently as February. Builder confidence is at a 14-year low, mortgage applications are falling, and more would-be buyers are renting instead.

My take

Don't wait for the Fed to rescue your buyers. Mortgage rates can fall even when inflation is rising, but those dips may be brief. Make sure your buyers are pre-approved, understand what they can afford at different rates, and have a lender ready to lock when an opportunity appears. And don't build your sales pitch around the return of 6% mortgages. Focus on what can make a deal work today: price reductions, seller concessions, and rate buydowns, especially from builders eager to move inventory.

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Small investors dominate as institutional buyers retreat 

Real estate investors purchased about 224,000 homes during the first half of 2026, a 7% decline from a year earlier and the lowest first-half total since 2020. But according to Realtor.com's latest investor report, the bigger story is who's buying: Small investors are gaining market share as institutional investors retreat.

Here are the key takeaways from the report:

• Investor purchases declined: Investors accounted for 10.7% of home purchases, down from 11% a year earlier.

• Small investors dominated: Those with 1–10 lifetime property purchases accounted for 66.2% of investor acquisitions, a 15-year high.

• Big investors retreated: Purchases by mega-investors (351+ lifetime purchases) plunged nearly 70% since early 2021, while large investors (51–350 purchases) also pulled back.

• Small investors favored cheaper homes: Their median purchase price was $295,000, compared with $380,000 for non-investor buyers.

• Cash remained king: Some 55.5% of investor purchases were all-cash, rising to 80.4% among mega-investors.

• Investor activity varied by market: Memphis (20.5%), St. Louis (20%), and Kansas City (19.1%) led, with Dallas–Fort Worth (16.5%) and San Antonio (15.3%) also showing substantial activity.

My take

If investors aren't part of your prospecting strategy, they should be. Small investors now account for two-thirds of investor purchases, and more than half of all investor acquisitions are made in cash. That's a significant opportunity in a market where elevated mortgage rates continue to sideline traditional buyers. Unlike mortgage-dependent buyers, cash investors aren't constrained by borrowing costs. And the opportunity may be larger than the numbers suggest, since investors buying in their own names aren't included in the report. So make investor prospecting a priority. Build relationships with local landlords, small property owners, and aspiring investors. Don't just wait for mortgage rates to fall and buyers to return. Pursue the buyers who can transact now.

Markets where home prices grew and fell the most

U.S. home prices rose 0.25% month over month in September on a seasonally adjusted basis, up slightly from 0.21% in August and in line with the modest gains seen since spring. 

Compared to a year earlier, prices were up 3.8% in September, the fastest annual growth rate since June 2025, according to Redfin.  

Among the 50 most populous metros, these are the markets where prices grew and fell the most, YOY:

My take

Buyers have more leverage than they’ve had in a decade, yet prices keep inching up. Why? Sellers can afford to wait it out. Many are sitting on so much equity that they’d rather hold out for a better offer, or pull their listing entirely, than cut their price. Add a strong luxury market, and you get a floor under prices nationwide. Texas is the exception: it has some of the country’s biggest buyer’s markets, and that’s where sellers are finally giving ground.

Schematics

The news that just missed the cut

• Use this to generate 100 leads in 90 days

• How to help buyers get off the fence

• AI mistakes costing agents time and clients

• MBA’s proposals to lower costs for homebuyers

• Stagnant housing market? Not for luxury homes

Foundation Plans

Advice from James to win the day

As part of our Prep for 2027 series, today I’d like to offer some tips on how to get creative with listing presentations. One of the methods I like using in my pitches is the case study method. It uses your past listings to demonstrate your process and to showcase your expertise, thoughtfulness, and ability as an agent. Here's how to use it:

1. Outline and detail your listing process – You probably already have a process for getting a home ready to list. Outline this process. Be detailed and thorough but don’t overwhelm your clients. The point is to explain to the clients what they’re getting when they hire you by demonstrating the thoughtfulness, care, and intentionality you bring to everything you do as an agent. 

2. Collect data and document the process – This is how you'll show prospective clients why they should choose you as their agent. Collect before-and-after photos of previous listings, client testimonials, and the list and sale prices of homes you've sold. Show them your results and the difference you made. 

3. Put it all together – After you've clearly outlined your listing process and compiled data, it's time to take all of this information and package it beautifully. This can be a simple flyer or brochure, or you can create a video to send to potential clients. The most important thing is to show potential clients evidence of your success as an agent and how you can do the same for them.

Next week, I’ll share my tips for sharpening your buyer presentation. In the meantime, for more tips and strategies on creating effective presentations, explore these useful resources.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

“Your time is limited, so don’t waste it living someone else’s life.” — Steve Jobs

Each day is a gift – a chance to live the life you want. Ruthlessly focus on your goals. Don’t let your past or the fear of being judged distract or paralyze you. Choose to live with an integrity that you can be proud of.

Have a wonderful week, and we’ll see you back here on Friday!

- James