The inventory challenges besieging many regions throughout the U.S. residential real estate market are not lessening and the latest data indicates they will continue to be a challenge for some time to come. One segment of homebuyers in the single-family home market–institutional buyers–has been a part of the nation’s pool of buyers since the 2008 financial crisis. We wanted to examine how much this sector is affecting the market and how they are cutting a hole in the residential inventory available to individual homeowners.
They’re reliant on technology
Institutional investors are essentially iBuyers, en masse. Digital listing platforms available to the public, e.g. Zillow, means that people can see a listing go up ASAP–especially if they have a dedicated staff tracking such listings. Moreover, they also have access to the overarching market conditions (prices, etc.) in neighborhoods. The increasingly digital and data-driven nature of real estate transactions is what makes homes a worthwhile investment for institutions because they know where to buy them in bulk.
They come bearing cash
Maura Neill, a REALTOR® based in the Atlanta, Georgia metro area, has previously told RISMedia about her clients finding flyers with huge cash offers, or contact info to get one, in their mailboxes. Huge investment firms and hedge funds, surprise, have a lot of cash on hand and the discretion to spend it if that means raking in even more. Direct offers are ideal for them since they have the resources to make it happen, they’re hypothetically quicker, and they don’t need to pay agents or brokers. Talk with your clients about these tactics to be sure they’re making the best home sale choice.
Single-family homes become rentals
When investment firms buy single-family homes, it’s generally not just to hold onto it or resale it. The goal is to turn them into a rental property. This turns the home into a wealth-generating asset, not just a wealth-storing one. Homebuyers who want a permanent residence might be deprived of some options, though some economists have suggested that a boost in SFH rental properties will boost inventory as a whole through new construction.
They’re pulling back
Dr. Lisa Sturtevant, the chief economist of Bright MLS, has argued that investment firms are not causing market woes but simply reacting to them. Indeed, more recent reporting reveals that Wall Street firms have put a pause on homebuying due to high interest rates, a pattern seen in both institutional and individual investors and buyers alike.
