In this November Shortage Report, I want to explore why we still have this shortage, and why it might be going away soon. I do that in this short video on Facebook.
First, you’ve heard me raise alarms about ibuyers and short term rentals (STRs) in the past, here and here. Those can be institutional investors, or even massive real estate “brokerages” that use meta-data about the market to play the market for their own multi-billion dollar profits.
The Arizona Republic published a must-read article this last week about the tactics that ibuyers have used to shut out first-time home buyers. The take-away: as I’ve said for years, ibuyers have bought up inventory so that there is less for everyone else, leading to price increases.
Frankly, I think its ethically criminal and the sale of residential homes to institutional investors should be prohibited.
If you want to see a very entertaining and enlightening summation of what ibuyers are doing to play the system, watch this Las Vegas realtor’s TikTok video. He explains just how these massive brokers use the data they collect when people research for homes on their very well-known websites to harm home buyers.
As I see it, every realtor has a fiduciary responsibility to their clients. When ibuyers are more interested in playing the market, they are failing this very basic legal requirement. Unfortunately, our real estate commissioner (as least in this state) has not taken that position.
So, here’s the possible silver lining. According to the Republic and other sources, at lease Zillow and possibly other massive buyers are going to stop buying up properties and they are looking at selling off their massive inventory of homes, which are just sitting there.
I don’t know if they expect to sell them at a loss, but we will see what happens if prices begin to flatten or fall.
One of the problems we have as we consider the November shortage report is that we don’t have accurate data about how many homes are being used as investment properties, particularly short-term rentals. The county requires you to register if your home is being used as a rental property. But we don’t require that of short term rentals. We should.
The Republic article mentioned that 26% of all home sales has been investor buyers in the past year, way up from 10% in the summer 2020.
Similarly, but causing the same shortage problem, a report to the Maricopa Association of Governments, data analyst AirDNA presented the following slide, which showed in some cases hundreds of STRs per one census block.
However the staff at the Cromford Report cautioned when I asked about what data they have, that numbers in all reports are really just guesses, based on the name of the owner in the MLS.
In other words, this is a reasonable cause for the county or the state to require STR and investor buyers to at the very least register when they purchase a residential home for investment purposes.
Again, that is the very least. We need to seriously consider restricting all of this activity.
The fact is that these residential neighborhoods were never designed to be investor markets for billionaires.
They were meant to be safe neighborhoods and places where people could find affordable housing while they save for their future.
