September 28, 2021

MP Now News

Mortgage News

Wall Street Is Scooping Up Homes, and That’s Bad News for Buyers

It has been a difficult year buying a home for new and seasoned buyers. low inventory stock has created a world of competition in the housing market, and many of the apartments that have have come onto the market have ended in bidding wars.

The result? Home prices have risen this year, causing buyers to be overestimated. And during Mortgage rates especially in the last few weeks sitting at competitive levels, they are not low enough to make up for the inflated prices.

But it’s not just that individual buyers have to keep arguing about the limited supply of available apartments. There’s a lot of competition from another source – Wall Street.

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Investors collapse

Investment firms are buying houses at a rapid pace because they provide an opportunity to make money. These homes are available for rent, and this rental income can then be used to buy more real estate or invest elsewhere.

But while home buying could make investors wealthy, it puts the average buyer at a crucial disadvantage. Investment firms with access to large amounts of capital have more flexibility when buying a home because they can afford to pay more for real estate and not have to rely on it Mortgages to finance them.

In contrast, the average buyer generally cannot swing a home without paying it off through a mortgage over time. However, because sellers prefer offers that are not dependent on mortgage financing and approval, investment firms have a clear advantage. And that leaves regular buyers in the rain.

Can you go up against Wall Street?

Even before the pandemic, investment firms were routinely buying real estate to diversify their portfolios beyond traditional assets like stocks and bonds. But now they are buying up houses faster to take advantage of rising rental prices. According to real estate analyst Green Street, single-family home rentals are expected to generate an annual return of 6.8% for private investors over the next three years, compared with 6.1% for apartments and 6.3% for industrial properties.

As a regular buyer, how can you compete with these investment firms? The best thing to do is to keep an eye on your local real estate market and pounce on it as new homes get listed. If a house becomes vacant on a Tuesday morning, ask your real estate agent to arrange a Tuesday afternoon viewing. Beating investors could help you snag a home when the competition is fierce.

At the same time, do your part to present yourself as the most qualified buyer possible. Get Pre-approval letter from a mortgage lender, so sellers can see that you are a serious buyer whose finances have already been scrutinized.

Finally, be patient. At the moment there is only a limited supply of houses available for sale. But over the course of the year we could see inventories slowly but surely climbing up. There was already a touch more inventory in June compared to May, and if that trend continues, home buying might get easier – even if investors are part of the mix.