The nation’s housing sales and rental markets remain severely undersupplied in both for-sale and for-own homes.
As of March, the available inventory of existing homes on the market amounted to only two months’ supply, far short of the desired six months, according to a May study released by the National Association of Realtors (NAR).
In Texas, Tarrant County saw that every other home sold last year (52%) was bought by either a corporation, company, or investor, according to the report.
Low-interest rates in 2020-2021, with the 10-year T-note hovering around 2% in both years, have prompted investors to seek higher returns elsewhere. Real estate is one such asset, according to the report.
JPAR Real Estate’s Shannon Ashkinos told the Dallas Morning News that families trying to purchase homes are having trouble because of housing market speculation.
“Traditional homebuyers just can’t compete,” she said. “We’ve seen this over and over again. Anyone trying for a traditional loan is stuck, in a way.”
Counties with high rates of investor purchases share several characteristics, including significant population growth, a large share of rental properties, a high density of minority populations and millennials, and rising home prices and rentals costs. North Texas has seen home prices rise dramatically.
The median sale price of a home in Dallas-Fort Worth and surrounding areas reached $400,000 in April, the Dallas Morning News reports. This is a 23% increase from last April and a 51% increase since April 2019.
“That first-time home buyer price range no longer exists,” Ashkinos told the Dallas Morning News.
Aside from buyers with cash offers, homeowners sold to institutional investors because they agreed to purchase the property “as is” or offered a guaranteed sale, often using cash for the transactions.
The median existing-home sales price is rising at a double-digit rate of 15% year on year. Similarly, as of March 1, asking rents on multifamily properties were up 11% year on year, while single-family rents were up 13% year on year, according to NAR.
In March 2022, inflation reached 8.5%, giving investors even more reason to seek assets that offer an inflation hedge, such as residential rentals with annual rent adjustments. As a result of these circumstances, the real estate market has become appealing to institutional investors looking to purchase properties for leasing.