With the easy money gone, investors are retreating from the U.S. housing market at record speed. 

Investors bought nearly 49% fewer homes in the first quarter compared to a year earlier, with higher interest rates, softening rents and declining values cutting into their ability to make money, according to a report from Redfin. That’s the biggest annual decline in data going back to the first quarter of 2000 and was larger than the nearly 41% drop in overall purchases, according to the brokerage. 

The pandemic boom, fueled in part by low mortgage rates, drew in investors of all sizes and types, from single-family flippers to institutional behemoths. But the math became more complicated as the Federal Reserve drove up borrowing costs to ease inflation, a particularly bad recipe for investors who were benefiting from rising home values.

“It’s been about eight months since one of my listings sold to an investor,” Heather Kruayai, a Redfin agent, said in the report. “I rarely get offers from investors these days, and when I do, it’s a lowball offer on a house that’s been sitting for a while. Some smaller companies and mom-and-pop investors are still active in the market, but the big corporations aren’t buying anymore.”

Investors still in the market are increasingly buying low-priced properties, ramping up the pressure for everyday buyers searching for a starter home. The institutional and mom-and-pop buyers still accounted for about 18% of home purchases in the first quarter, down from a peak of about 20% a year earlier, Redfin said. 

Even investors who pay with cash are getting squeezed from higher rates because many of them finance renovations and other costs with short-term loans. For landlords, lower rents and rising property taxes and insurance are slicing into profits.

Flipping a home is also increasingly challenging, especially in areas where prices are sinking. In Phoenix, investors sold at a loss for nearly 31% of the homes they divested, more than double the national rate. 

Investors lost market share to traditional homebuyers in 17 of the 40 metropolitan areas analyzed by Redfin, led by Charlotte, North Carolina. In that area, investors accounted for roughly 18% of purchases in the first quarter, down from about 33% a year earlier, Redfin said. 

—With assistance from Patrick Clark.

This article was provided by Bloomberg News.