Outside investors eat up housing inventory in Charlotte

Outside investors eat up housing inventory in Charlotte
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Outside investors made up 14% of all home buyers in Charlotte from January to April 2021. They created the second largest net negative impact on housing inventory in the country.

Investors ate up the most home inventory in Phoenix/Scottsdale. This comes from data Realtor.com shared with Axios Charlotte.

Why it matters: When investors come in with all-cash offers, regular buyers can’t compete.

State of play: For months, Charlotte buyers have been telling me how this plays out. They place an aggressive offer on a house, so do 20 or so other people, and they all lose to the all-cash buyer. They repeat this process five times, if not more, before finally getting a home.

  • Of note: Investors make up 14% of today’s buyers in Charlotte. A year ago it was only 8.9%, and in 2018 it was only 9%.

“At some point, investors could contribute by selling more, but lately they’re not helping buyers out,” Realtor.com chief economist Danielle Hale said.

Driving the news: In April 2021, the investor buyer share of home sales hit a historical high. The net negative contribution was greater than it has been in years. Charlotte had the second largest net negative contribution to home inventory in the country.

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Data: Realtor.com.

In March 2020, investors sold more homes than they purchased, according to Realtor.com. But by August 2020, investors started acquiring more homes again.

  • During the height of the pandemic, investors became net sellers instead of buyers nationwide, Hale said.
  • Now, in Charlotte, investors are gobbling up real estate in record numbers.

Investors purchased 683 homes April 2021 — a record-setting number, according to Realtor.com data. That’s a 205% increase in purchases compared to April 2020, and a 58% increase from April 2019.

  • There’s such a large increase between April 2020 and April 2021 because investors stopped buying during the initial COVID-19 outbreak. However, the 58% increase from April 2019 shows a significant jump.
  • Investors are also selling Charlotte homes less than they used to. In April 2021, investors sold 22% fewer homes than in April 2019.

Of note: These investors are primarily holding onto houses and renting them out — a notable contributing factor to inventory crunch. It makes sense because Charlotte rent prices have continued to grow, even through the pandemic. In April 2021, rents rose 7.8% year over year in Charlotte.

  • In June, rent rates were up 10.8%, Hale said.

Wall Street-backed landlords now own more than 11,000 moderately priced single-family houses in Charlotte, according to reporting from UNC Charlotte’s Urban Institute in June.

  • Companies like Invitation Homes, American Homes 4 Rent and Tricon American Homes renovate the houses and rent them out.

Outside investors have also been buying up older, cheaper apartments known as “naturally occurring affordable housing,” or NOAH units, as Axios reported last year. Investors fix them up and then increase rent.

  • A group of developers and local business leaders recently established a fund focused on preserving NOAH in Charlotte.

Also of note: There are cities where the opposite is happening — investors are making a net positive impact on inventory. In these cities, more investors are selling than buying.

  • This is happening in 19 of 50 metros Realtor.com including in the study. Atlanta, Dallas, Baltimore, Los Angeles and San Francisco are the top markets where investors have a net positive impact on inventory.
  • In these areas, rents could be decreasing or stabilizing while home values grow. “It might be a good time to sell and take their money elsewhere,” Hale said.

Bottom line: Right now, investors are exacerbating the inventory crunch in Charlotte. Inventory could improve once investors put their properties on the market, but right now, there’s little incentive for them to do so.

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