Investors are driving up house prices and challenging first-time buyers

On a median-priced home of $405,000, that amounts to an additional $7,300 to $17,415. These outbids often include cash transactions, waived contingencies and faster closings.

‘There are several reasons why an investor might pay more than market value’ Malone wrote. “It could be a tactic to close on a house quickly, or it could be a speculative bet that the seller has underpriced a property. It could also simply be a lack of local knowledge.”

Despite higher financing costs, investor activity has more than doubled since mid-2020. By early 2025, investors accounted for about a third of all home purchases in the U.S., the company found.

Cotality experts expect investor activity to remain stable until the end of 2025, even as investors continue to pay premiums on top of already high house prices.

Smaller investors with fewer than 10 homes typically pay about 1.8% above market value, while large investors who own more than 1,000 homes pay an average of 4.2% more. Malone said overpayments could be offset by long-term price increases or higher rents, especially for smaller landlords.

According to Cotality, rents have risen 2.3% year on year as more potential buyers remain renters. But rental growth has slowed and is below pre-pandemic averages. Over the past five years, rents for cheaper homes have risen by about 30%, while house prices have risen by 50%.

While this gap has reduced profits for many investors, smaller investors remain resilient. They represent approximately 14% of all investors and purchase the majority of investment properties in the top 20 U.S. metropolitan areas.

In Los Angeles, where investor activity is high, rents rose 3.1% between July 2024 and July 2025, helping small landlords recoup their costs.

Starters in the market face the most pressure. Malone wrote that investors accounted for 37% of lower-priced home purchases this year. Over the past five years, the share of investors in homes has doubled and the average age of a starter in the housing market has risen from 33 years in 2020 to 38 years. As a result, many potential buyers continue to work as tenants.