Pushback Coming From Surprising Places After Revelation That Investors Bought 25% Of America’s Affordable Housing Stock In 4th Quarter

Pushback Coming From Surprising Places After Revelation That Investors Bought 25% Of America’s Affordable Housing Stock In 4th Quarter

Americans looking for affordable housing are becoming accustomed to bad news about the housing market.

A recent Redfin showed that investors purchased 26% of America’s affordable housing stock in the fourth quarter of 2023. This is a blow to buyers whose purchasing power is already severely diminished by a lack of inventory, surging prices and high interest rates.

The Redfin report paints the crisis facing many of America’s prospective homebuyers in sharp relief and illustrates the problem is getting worse. The 26.1% share of America’s affordable housing stock that investors gobbled up is not only a record, but it also represents a 24% increase in investor’s purchasing activity over the previous year. Comparing those numbers to investor’s purchasing activity in other housing sectors reveals an even greater disparity.

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Redfin groups homes into three price categories: low-priced, mid-priced and high-priced. During the same period in 2023, investors purchased 13.1% of the mid-priced home inventory and just under 16% of the high-priced inventory. That means they are specifically targeting the homes that everyday Americans are looking for. The difference is that while John Q. Citizen is writing offers contingent on financing, big investors are making cash offers.

Prospective Buyers Find Themselves Outgunned

If you happen to be one of the millions of Americans on the wrong side of this equation, you know it’s not a fair fight by any measure, and worse, there doesn’t appear to be anything anyone can do to reverse the trend. For their part, sellers are doing what they’ve always done, which is to accept the best offer and move on to bigger and better things.

The long-term trend points to a permanent presence of investors in the housing market. Redfin’s study showed that investors purchased 20% of the homes sold in the fourth quarter, with 68% of those purchases being single-family homes. The investors are focused on the lower-priced properties for their upside potential. The point of real estate investing is to buy low and sell high.

“I get tons of emails every day from investors looking for properties, but of course, they only want homes that are under market value, which are hard to come by,” Redfin Premier Agent Carrie Carruthers of Riverside said. “When they find those properties, they pile in.”

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Another thing to consider is that it’s not necessarily real estate investment trusts (REITs) and big Wall Street investors doing all the buying.

Investors Have Always Been In The Housing Market, But This Is Different

Home remodeling and flipping have become popular themes for dozens of popular real estate television shows, and everyday investors were making money by flipping houses decades before HGTV was even a thing. So, if the home flippers and small to medium-sized home flipping operations have always been here, what’s the difference between the last 20 years and the last quarter of 2023?

It’s Not Just Access To Money But Big Data And Analytics That Are Changing The Game

That question has several answers. The sheer volume at which REITs and other investment entities can gobble up housing inventory is a major factor. However, it’s their access to data and analytics on home sales and buying trends that may be changing the game. REITs and other investment funds can employ analytics to interpret predictive data in a way that they never could before.

It allows them to spot hot markets before they get hot and make aggressive moves into those markets and buy large tranches of inventory. Their access to capital and banking connections also puts REITs in close contact with real estate developers. Now a fund can buy some, or all, the homes a developer is building before construction is done. They can buy and hold turn-key inventory until markets take an upswing.

By contrast, the traditional home flipper was a wily operator, who scoured foreclosure lists or county tax auctions and did stealthy drive-by scouting on potential acquisitions. At the most, they could only purchase a few homes at a time, and they needed to turn them over relatively quickly to make a profit. Today’s landscape is different, and politicians on both sides of the aisle are taking notice.

Even Conservatives Are Pushing Back

The legislative pushback against REITs and investment funds making large home acquisitions is underway, and one push is raising eyebrows because it’s coming from one of America’s most reliably conservative states: Texas. Gov. Greg Abbott has openly called for legislative action against Wall Street’s presence in the home market. It’s no secret that letting the market be free and unregulated is one of the most sacrosanct principles of conservatism.

Eyebrows were raised when Abbott recently posted this on X, “I strongly support free markets. But this corporate large-scale buying of residential homes seems to be distorting the market and making it harder for the average Texan to purchase a home. This must be added to the legislative agenda to protect Texas families.”

Abbott is an arch-conservative, and Texas has one of the nation’s hottest housing markets, largely because of the affordability of homes in the Lone Star State. When a call for legislative action, however vague, comes from a conservative of his stature, it becomes a lot more likely that significant action will be taken. If you’re on the buyers’ side of this issue, now would be an opportune moment to remember that “the squeaky wheel gets the grease” and make your voice heard.

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This article Pushback Coming From Surprising Places After Revelation That Investors Bought 25% Of America’s Affordable Housing Stock In 4th Quarter originally appeared on Benzinga.com

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