Hedge Funds and Single Family Properties

There have been stories of hedge funds and big banks putting pressure on the single family housing market by coming in and purchasing properties for cash to add to rental portfolios. I have heard it from other Realtors, investors, and home buyers alike. The rumor is that by doing this, the institutions have driven up the prices, and once they decide to start selling off these properties, prices will crash. Is this the reality of the situation?

The National Multifamily Housing Council tracks statistics of US households. Some of the statistics they keep are based on owner-occupancy, renter-occupancy, what type units are rented, and ownership of institutional investors, among many other rental statistics.

When we look at 2015, the last year that data is available for, in the United States, there were 118,208,250 households. Of those, 43,701,738 were renter-occupied, which accounts for approximately 37%. Of those renter-occupied units, 15,177,698 of them were single family structures (Homes, Town homes, and Condos, units that are individually deeded and owned, so not multifamily properties).

Now when we dig further into Institutional ownership of rental properties, we can see that the largest owners only have multifamily and apartment assets in their portfolios. In fact, only five of the top 50 portfolios are invested in single family units, as shown below.

 

These five largest investors account for approximately 108,000 single family units total. In fact, when we dig deeper, we find that there are a total of only 250 entities that own 250 or more properties, which accounts for approximately 260,000 properties. This is approximately 1.7% of the single family rental properties in the United States.

So that means the vast majority of rental properties are owned by smaller investors in smaller quantities.

Do I think if there were 260,000 additional properties that came to market across the country it might impact prices? Probably to a small extent, but I don't think it would be significant. The chances of them all coming on the market at once is highly unlikely, but even if they all did in the course of a year it would probably stabilize the price point that most of these homes are located in, since as we know the lower price point that investors, first time home buyers, and those looking to downsize, is currently the most competitive for buyers and, at least in Charlotte, has the lowest number of months of supply in history.

As always, if you or someone you know has any questions about our current market, whether to buy, sell, or invest, I am always available to answer those questions. Do not hesitate to contact me!

Where Do We Go?

One of the questions I am often asked in the current seller's market, which is a very valid one, is once I sell this home, where do I go next? If it is such a seller's market and by selling this home for top dollar, won't I have to pay top dollar for the next home I buy? That doesn't necessarily have to be the case. Also, I am not advocating selling your home just because you will get top dollar, there has to be additional reasons to sell.

First we should discuss the reasons for selling your home. We find on average, people move homes about every seven years. This is typically due to changes in life or lifestyle, such as getting married, having children, those children growing, job change or promotion, children leaving the home, or just wanting a smaller home or yard to maintain. While you will probably get more on the sale of your home now than you would in other markets, unless you have another reason besides purely financial, I would not recommend selling.

Now we can go into my reasoning why selling now may be ideal for you. If you are up-sizing your home, besides the obvious life change events discussed in the last paragraph, it makes sense to make a move now as opposed to waiting for additional reasons.

First, interest rates are still at historically low levels. By moving now you can acquire a new home with a lower monthly payment than you will be able to if they increase. A rate increase of 1% will decrease your buying power by over 11%.

Additionally, while we are in a seller's market in most price points, the higher you look in price range, the more balanced the market is. I am not going to call it a buyer's market, but it is much closer to a stable market when you begin to look at homes priced over $400,000. This means if you are selling at a $250,000 price point you are not buying into that same seller's market that you are selling in.

Finally, making your move now may make sense simply due to the fact that by waiting, you are prolonging your future mortgage payments. If you wait for a market shift in all segments, that may take two years, five years, ten years, who knows really. by waiting you are just extending how long it will take to pay down that next mortgage, which may just be further into your planned retirement. Mortgage payments are one of the items that most retirees would like to have off their plate before reaching the typical reduced income of that phase of their lives.

If you or someone you know is considering buying or selling a home, please put me in contact with them. I would be grateful for the opportunity to go over this and other information in more detail. As always, I am here for any real estate needs.

Importance of Photography

These days, the cameras on everyone's smart phones are getting better and better. And with this change, everyone seems to think they are a photographer. While this might be the case for your "selfies" and casual photos that you plan to post on Facebook and Instagram, this is not the case for when you are listing your home for sale. Nothing short of a professional photographer who specializes in real estate should be acceptable for your listing photos. If your potential listing agent is not providing such a service, you may want to look elsewhere.

Looking at NAR statistics, we know that 90% of home buyers search online at some point during the process of finding their next property. This online search will typically be your first impression on the potential buyers. You only get one chance to make this impression, so why not put your best foot forward?

A recent report by Inman tells us that 1 in 3 buyers has made an offer without actually seeing the property they are offering on in person. Do you think people are going to be making offers on properties unseen properties with your listing agent taking photos with their iPhone? Unless they have some professional editing software and great add on lenses for their phone, this process is not going to do your home justice in the eyes of potential buyers.

As part of all listings, I have a professional photographer come and capture the true essence of your home. I also bring in a stager for a consultation to make sure that when we do take the photos, your home is ready and looking its best. See more about what sets me apart in the video below.

If you have any questions about listing your home, the process, or anything else about real estate, do not hesitate to contact me.

Also, if you are curious to the value of your home, click here.