Wall Street Is Using Tech Firms Like Zillow to Eat Up Starter Homes
bloomberg.com
bloomberg.com
Look at this hypocritical anecdote from the article:
Back in 2001, Nicole Prince was able to buy a modest, three-bedroom home there while earning $12-an-hour. She lived in the house for a few years, moved to something bigger nearby and kept it as a rental. Last year, Prince, who’s Black, decided to sell and turned to the iBuyers. Offerpad agreed to pay $191,000 — far more than she thought she’d get: “I was like, ‘What?’ You couldn’t say no.”
The sale closed in mid-September. About three weeks later, the house was scooped up by Tricon Residential, a landlord that buys and manages single-family rental homes, for $5,000 more than what Offerpad paid, according to data from Attom. It still nags her that it didn’t go to a young person or family of color — somebody that was starting out like she was two decades ago.
So she got a far higher than expected price, but then has an opinion on who the new owner should sell to? If she actually cared, she could have chosen to sell at a lower price to her desired target audience herself.
This is a serious story, with data backing it up. One factor of rising home prices is the limited supply, which ibuyers make worse when they buy what limited supply there is - here's your data:
> "The three largest iBuyers acquired more than 27,000 homes in the third quarter of 2021, nearly twice as many as they bought in the previous three-month period. At the end of September, the companies owned more than $10 billion worth of real estate."
> "Investors accounted for more than 18% of all U.S. home sales in the third quarter, according to research from Redfin Corp., the highest share since at least 2000. Atlanta was one of the most popular markets, with investors buying 32% of homes sold during that period."
> "McDonough, Georgia, is a hot spot within a hot spot. Roughly 30 miles southeast of downtown Atlanta, it’s a city of about 29,000 where two-thirds of residents are Black...About 70% of those houses went to investors, many without ever being listed."
And the sources:
> Deed records were pulled on Dec. 23 from a national database of iBuyer transactions compiled by Attom Data Solutions. Bloomberg News then matched records where the seller’s name corresponded with an entity used by Offerpad, Opendoor or Zillow. Buyers whose names didn't appear to be a person or a family or living trust were categorized as an investor or other entity.
> Bloomberg used location data provided by Attom to determine each home’s census tract, which was then used to pull demographic and housing characteristics of the surrounding area from the 2019 American Community Survey (five-year estimates). The rate of flips was calculated by dividing the number of sales to investors in majority White and non-White tracts by the number of single-family homes in those areas.
I follow news on the housing market obsessively - this is among one of the most thoroughly researched articles I have seen.
> A representative for FirstKey Homes, a Cerberus portfolio company, said that it's purchased just 1% of its properties through iBuyers. Kathleen McCarthy, global co-head of Blackstone Real Estate, said that “not one of our portfolio companies have purchased a single off-market home from an iBuyer.”
I am absolutely agreeing that the steep rise in home/rent prices are a serious problem. But I am not convinced that iBuyers are moving the market that much, and the root of the problem in the most displaced markets remains NIMBYs that prevent new construction that prevent supply to rise up to meet increasing demand.
I also recommend these 2 articles by Philo which talk about the effectively-cartel like behavior that exists in the housing market:
https://philo.substack.com/p/housing-medallions
https://philo.substack.com/p/cartels (a shorter summary is here - https://ilearned.substack.com/p/13-on-competition-and-monopo...)