Media reports have created the impression that “Wall Street” interests are dominating the purchase of homes for sale, squeezing out individual buyers and causing the low inventory of homes for sale. That’s not exactly true.
What’s happening is that those purchases are happening through an off-MLS process, with very few on-MLS listings, based on my own observation and experience, being purchased by those large investors.
In fact, I can’t think of even one transaction that involved a large entity purchasing one of Golden Real Estate’s listings. And they certainly did not hire us to buy another brokerage’s listing. All our listings have been purchased either by owner-occupants or by small investors — homeowners themselves, who may have a portfolio of rentable homes or condos.
If you’re a homeowner, you’ve likely received, as Rita and I have, many solicitations to sell your home without putting it on the MLS — a bad idea if you want to get the highest price for your home. Also, brokers like me regularly receive emails and texts asking whether I have a “pre-MLS” listing that they or their client could buy “as is” before it’s put on the MLS. My standard reply to such solicitations is that I would never encourage a seller to sell their home without putting it on the MLS, because that’s a sure way to get less than their home is worth. I consider it my responsibility as their agent to get the highest possible price by exposing their home to the maximum number of buyers. That is not achieved by selling one’s home to an investor without putting it on the MLS.
Media experts and others continue to treat the low active inventory on the MLS as the result of reduced number of homes being entered on the MLS, including by off-MLS sales. In fact, the number of new listings this April was higher than both prior Aprils, but the number of active listings keeps declining because those new listings sell so quickly.
Yes, some of those off-MLS sales might have ended up on the MLS if they had not been solicited, but I think mostly they are homes which the owners had not intended to sell before they got “an offer they couldn’t refuse.”
In researching this topic I found a March 31, 2022, article from The Washington Post which highlighted this very problem of big investors buying up homes and converting them to rentals. Using data from Redfin, it reported on major spikes in such purchases from 2020 to 2021. The Denver market had less such activity than most other major markets, but still the percentage rose from 8.4% in 2020 to 12.4% for 2021.
Above is a chart from The Post’s article, based on the Redfin data. Each of those thin lines represents a different metro area. I inserted a carrot symbol at each end of the line for transactions in the Denver metro area. What’s remarkable is that all but two of the metro areas show a spike in investor purchases in 2021. Those metro areas that didn’t show a spike are New York City and adjoining Nassau & Suffolk Counties.
It’s hard to ignore that the pandemic must have played a role in that abrupt rise in purchases by big investors, defined in that article as entities with 100 or more purchases.
The article confirmed that these transactions typically originated from letters or postcards sent to homeowners offering an off-MLS purchase of their homes “as is.” It also showed that majority non-White suburbs experienced most of this activity, giving the process a racial tinge I didn’t expect to see.
Here’s an excerpt from that March article: “In Charlotte and elsewhere, according to The Post’s analysis, investors have purchased a disproportionate number of homes in neighborhoods where a majority of residents are Black. Last year, 30 percent of home sales in majority Black neighborhoods across the nation were to investors, compared with 12 percent in other ZIP codes.” The article didn’t claim that the letters and postcards targeted such communities, only that most sales occurred there.