Tech companies and investment funds have their eye on residential housing. I wrote about this a few months ago and wanted to do a follow-up piece. Here are some things on my mind as well as fresh visuals. Any thoughts?
1) iBuyers are on a rampage:
The iBuyer model has been on a buying spree in many parts of the country. They are purchasing to flip and here is a breakdown of their activity in the Sacramento region based on Tax Records (Realist).
- Opendoor, Zillow, and Redfin own 690 units in the region.
- Opendoor and Zillow each own about 330 properties.
- The average price of acquisition was $555,000.
- The median price of acquisition was $545,000.
- Besides a few outliers they are NOT targeting the luxury price point.
- iBuyers represent 6.4% of all listings and pendings right now.
- The iBuyer model does not represent 93.6% of the active market.
- Acquisitions are spread throughout with half of purchases below the regional median price and half above.
2) Invitation Homes is back:
I reported a few months ago that Invitation Homes is back and since May they’ve purchased 77 units in the Sacramento region. In 2012 and 2013 they bought tens of thousands of units across the country in many markets. At the time they were backed by Blackstone, but these days they are not affiliated with Blackstone.
What is Invitation Homes buying?
- They purchased 77 units since May 2021.
- They’ve targeted homes typically between $450-550K.
- 74% of their acquisitions have been under $500K.
- They bought 0.5% of all MLS sales since May (half of one percent).
- 88% of their purchases had an MLS number, which means the bulk of these sales were publicly listed for sale.
- Invitation Homes is definitely competing with first-time buyers even though overall the fund doesn’t have a massive footprint in the market.
1) Huge rent growth is propelling big funds: Having lofty rent gains in recent years has caught the attention of big investors and is essentially allowing them to play the market these days. It’s wild to think investors can presumably make the numbers work after ten years of price growth.
2) Hype vs Reality: Often the narrative is that investors are dominating the market and buying everything. For instance, there were sensational tales a few months back about Blackrock purchasing way above market value, but I have yet to see any data to back up those claims (I’m open ears if someone has something). Anyway, there is no mistaking growing interest from tech companies and Wall Street within residential real estate and we need to watch what they do. But we also need to keep sensational narratives in check.
3) Profit and Convenience: The iBuyer model is nowhere near a dominant force in the marketplace, but we’ve seen exponential growth over these past three quarters. A dissertation can be written on what these companies are doing, but I want to make a simple point. I often hear about how this model is designed to help make things more efficient for consumers, but let’s not forget these companies are here to infiltrate the existing real estate model to make profit. So in the midst of all the slick advertisements let’s be real about the big focus, which is to make money off consumers.
Thanks for being here.
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Questions: Do we want Wall Street and tech companies to own more of the real estate process? Is this a good thing for the public?