Real estate speculation pushes average Texas buyers down

The sticker shock shuts many first-time home buyers out of the market or forces them to dig deeper into their pockets to win a bidding war.

This comes as no surprise to home seekers, but one key reason should be cause for concern. What landlord hasn’t received a call or text from an aggressive real estate investor asking if our home is for sale? This hot seller’s market can allow a homeowner to cash in and move on to the next stage of their life. It can also fuel speculative bidding wars that inflate property values ​​and exacerbate the country’s housing affordability crisis.

According to National Association of Estate Agents, businesses, corporations or limited liability companies accounted for 13% of all residential purchases nationwide last year. About 28% of purchases in Texas in 2021 went to institutional investors, more than in any other state. In North Texas, institutional investors accounted for 52% of deals in Tarrant County, 45% in Rockwall County, 43% in Dallas County, 39% in Denton County, and 34% in of Collin. All are well above the national average.

Part of this trend can be attributed to Texas’ higher economic growth than new construction, and inflation prompting investors to acquire and turn many existing residential properties into lucrative rentals. According to the Realtors Report, the percentage of home purchases by institutional buyers increased 1.4 points last year compared to 2020. And in counties where the share of investors exceeded the national average – like most of North Texas – enrollments are down 7% per year. — year-over-year from March 2022. In counties where investor share was lower than the national average, listings were down only 4% year-over-year.

These trends have turned many homes into traditional rental units and weekend vacation retreats like short-term rentals, and could be a canary in the coal mine ahead of a soon-to-burst property price bubble. . Texas A&M University’s Texas Real Estate Research Center reports that the median selling price of a home in and around Dallas-Fort Worth reached $400,000 in April, up 23% from last April and an increase of around 51% since April 2019.

Is it sustainable? Of course not. The last time housing experienced such a market shake-up was in 2005, a precursor to a crushing market correction in 2008, when subprime borrowers defaulted and the economic cascade suffocated the global financial system. The economic causes and effects are different today. Nonetheless, housing is an artificially scarce commodity and as such may drive higher prices at this time.

There are some signs that the market may cool down a bit as interest rates rise. But housing affordability is a national issue with ripple effects impacting neighborhood stability, property tax rates and economic mobility. Eventually, real estate markets will correct as affordable supply comes online. Until then, buckle up. The journey will be rocky.

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