Home News First-Time Home Buyers Are Getting Squeezed Out by Investors and Corporations

First-Time Home Buyers Are Getting Squeezed Out by Investors and Corporations

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Charlotte, NC — At the first meeting with a client, Sarah Ortiz Hilton, who wanted many to buy their first home, read the list of warnings.

Realtors Hilton tells them that they may have to offer tens of thousands of dollars above the asking price just to reject those offers anyway. They may have to pay thousands of dollars at a non-refundable fee to get the seller to consider their offer. And if they’re looking for a home for less than $ 300,000, they may be out of luck.

In part, her warning message reflects a national housing market deficit, rising interest rates and supply restrictions. But that also reflects another, especially in the booming Sunbelt market like Charlotte. The impact of real estate investors buying homes, especially at the bottom of the market, and turning them into rental properties is increasing.

In cities like Charlotte, that trend exacerbates shortages of homes, pushes prices up, and makes home ownership out of reach for many first-time buyers, the biggest losers on the market today. ..

Nadia Evangelow, senior economist at the National Association of Real Estate Agents, estimates that about 2.5 million households buying their first homes will be locked out of the market this year. That’s 15 percent of all first-time homebuyers. Investor purchases are increasing obstacles in already difficult markets.

“The more investors buy the entire community and turn it into a rental community, the more people have no choice,” said Hilton, who moved from New York to Charlotte in 2007, in an affordable market. “They either can’t afford it anymore or they have nothing to buy.”

Maps edited by Mecklenburg County, including Charlotte, show the ocean of points that show corporate ownership throughout the region. The exception is the pie-sliced ​​segment that extends from downtown Charlotte. Historically white and wealthy districts are often referred to as “wedges.”is more than 93 percent Of the homes purchased by companies as of May 2021, they were purchased for less than $ 300,000. Many of them were mostly in black neighborhoods.

Nationally, large investment companies are still a small percentage of American homebuyers.

“It’s very difficult to claim that a handful of companies that own 300,000 homes nationwide actually have the ability to influence home prices, rents, etc.” David Howard, Managing Director of the Council, said. Single-family rental housing industry.

However, their share is expanding. According to real estate firm Redfin, real estate investors bought a record 18.4% of homes sold in the United States in the fourth quarter of 2021, up from 12.6% in the previous year.

It also has a much higher market share in some markets, especially in the relatively affordable Sunbelt metropolitan area.

Investors in Charlotte and Atlanta Purchased More than 30% of homes sold in the fourth quarter of 2021, according to Redfin. In Jacksonville, Florida, Las Vegas and Phoenix, I bought just under 30%.

Representatives of the housing industry define investors as any institution or company These numbers are by small local owners who may own one or two buildings through a limited liability company Please note that it represents a purchase.

For decades, Marjorie Parker knew all his neighbors who lived in the eastern part of Charlotte in the Hidden Valley. Living there was not always easy, as gang violence was rattling the streets on a regular basis. However, Parker found comfort in the power of the community and the economically stable middle-class life it brought to black families.

The first change she noticed was a leaflet outside the door. They offered to buy her house for cash. Soon her phone started ringing many times a day, and she received a call offering the same thing.

She promised to keep her home, but for many who are lagging behind property taxes or struggling to maintain their property at an older age, the offer is a welcome way. was.

Last year, when the house next door was put up for sale, a young family gathered. However, the house was soon sold to a rental company.

“It should have some limits. You can’t have a small number of people have all the homes,” Parker said. “”Places where the general public cannot buy a home are sad days in the United States. “

Since apartments in her neighborhood usually rent for over $ 1,500, Parker and other long-time homeowners are worried that the property tax hike could drive more residents out.

There are also problems for the lessee.According to various surveys, the landlord of a company Raise rentDrive out their tenants and keep their property inadequate than small landlords. 1 According to the 2018 Department of Housing and Urban Development, owners of large Atlanta companies are 68% more likely to submit eviction notices than smaller owners.

Faced with the steady invasion of corporate buyers, some areas are fighting to stop them.

Residents of Avalon’s town home community in Mallard Creek, just north of Parker’s neighborhood, saw businesses quickly buy and rent homes for sale. By last year, more than 40% of the homes there were occupied by renters, according to Keri Miller, Treasurer of the Homeowners Association.

The association is dissatisfied with the inadequate maintenance of the home where the lessor lives and requires that anyone who buys a home in the community live in the unit for at least a year before renting a lease amendment. I voted for the proposal.

The amendment was passed, and by February, the share of lessees had dropped by 10%, Miller said.

Industry insiders have criticized these efforts as discriminatory against lessees.

“Why are young families who aren’t in a position to buy a home for some reason prevented from living in a neighborhood close to neighborhood amenities such as school or work?” Howard said.

Demand for rental housing is high, and “companies are entering the market and trying to meet that demand,” he said. He added that companies are addressing supply shortages by building a new rental housing community from scratch.

However, critics say that renting a house has far less opportunity to build long-term stability and wealth than owning it. And the typical $ 1,500 starting rent in the region has done little to meet the needs of lessees at the bottom of the market.

Jameisha Wilkes spent months treating her daughter’s autism, working in a warehouse in the food service industry, and finding a home that would bring her closer to her mother’s home in the same parcel.

A sign for sale appeared outside a modest house in her parcel in the northeastern suburbs of Charlotte. With the help of her down payment support program and financing up to $ 180,000 in mortgages, she thought she would probably be shot.

But when she searched for a home on Zillow, she was shocked that many homes in the neighborhood sold for over $ 300,000, twice as much as those sold just about five years ago. received. Occasionally she will find something in another neighborhood near her price range, but it will soon disappear.

“If you have an affordable home, it’s already gone within 24 hours,” Wilkes said. “In most cases, you can’t even get to the open house before the offer is already available.”

Currently, Wilkes is busy packing his luggage, but he never moves to his house. She and her daughter in a small one-bedroom nearby after Tricon Residential, a landlord who currently owns more than 1,600 single-family homes throughout Mecklenberg County, offers to renew more than $ 150 a month in debt. I decided to move to my apartment. Money to buy.

Local authorities are looking for ways to give people like Wilkes a chance to fight home ownership. For example, you can buy land and offer it at a price below the market price, or create a law that adds a barrier to corporate ownership. However, no specific policy has been proposed.

Even at the federal level, efforts to curb the spread of corporate homes have been delayed. Since being introduced by Senator Elizabeth Warren of Massachusetts, Sherod Brown of Ohio, and others, “allowing private equity firms to get all the rewards of their investment and protect themselves from risk” laws, taxes, A Senate bill has been submitted to the Commission to close the regulatory loophole. In October.

Meanwhile, many homebuyers feel their last hope is a stroke of luck.

On her route as a mail carrier, Ashlief Lloyd took pictures of signs for sale to search the list during breaks, but were listed one after another outside her $ 300,000 budget. The offer she made at the five homes was rejected.

Floyd paid a down payment to raise the down payment, reduced Christmas gifts and extracurricular activities for his two children, worked as much overtime as possible, and often worked 65 hours a week.

Two years after starting the search, she found a house in a quiet parcel of northwestern Charlotte and an owner who promised to sell it to her family instead of the company. Last week she paid $ 292,000 at the closing price, $ 27,000 higher than her asking price.

“It’s over, the nightmare is over,” Floyd said. “We now have a foundation. We will sow seeds from here and grow from here. That is the feeling.”

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