Investors and Second-Home Buyers Take 1 in 5 Purchases

One in five U.S. home purchases in September came from individual investors and second-home buyers, the highest share in a little over a year. Mortgage rates sat at 7%.

That figure challenges a common assumption: borrowing costs this steep would push every buyer to the sidelines. For a sizable slice of the market, they haven't.

One Investor's Math

Justin Smith is a case in point. In June, the 34-year-old real-estate broker bought a duplex in Roscoe, Illinois, about 90 miles west of Chicago, for $250,000. He took out a 30-year fixed mortgage at 7%. He didn't wait for a better rate.

Smith isn't a newcomer dabbling at the edges. He already owns three apartment buildings in Roscoe and nearby Rockford. His latest purchase expanded a portfolio he's built in smaller Midwestern cities, where he says the entry cost is manageable.

"Smaller Midwestern cities can offer an accessible entry into real-estate investing because home prices are relatively low," Smith said. The figures support his point: Zillow estimates the average home value in Rockford at about $185,000, while the national median value sits at about $366,000. That's a gap of roughly half.

Capital Goes Where the Numbers Work

The pattern is straightforward. Investors respond to prices, and where homes cost less, a 7% rate can still pencil out. A buyer weighing a $185,000 property in Rockford faces a very different monthly obligation from someone eyeing a home near the $366,000 national median. Private capital finds markets where the math holds.

That's how markets are supposed to work. Individuals assess risk, take on debt themselves, and bet their own money on a return. Nobody handed Smith a subsidy to close on that duplex; he financed it at the going rate and accepted the cost.

The September figure also says something about who's still active in the housing market. When rates climb, experienced buyers with existing holdings and a clear view of what a property can earn are often the ones willing to proceed. Smith fits that description: he's a licensed broker with three buildings already under his belt.

What the Data Leaves Out

The source figures have limits. They describe the September share as the highest in a little over a year, but don't state the year. Smith's June closing likewise carries no year. And the figures don't break out how many of the one-in-five purchases came from investors versus second-home buyers, or how many buyers paid in cash rather than financing their purchase.

The headline number and the individual example behind it are clear. A 7% mortgage is a heavy lift. Plenty of buyers are still lifting it.

Why This Matters:

High rates were supposed to cool housing demand across the board, yet investors and second-home buyers made a fifth of September's purchases. That matters for first-time buyers competing with them, particularly in lower-priced markets like Rockford, where Zillow's roughly $185,000 average home value is exactly what draws investors in. From a market perspective, the figure shows private capital adapting to costly credit without government help. It also raises a fair question about affordability: when investors absorb inventory at the lower end, entry-level homes may get harder for owner-occupants to reach. Policymakers tempted to respond should weigh that against what the facts show here: individuals risking their own money, at market rates, in a market that's still clearing.