By Mike Bodeen · 16 August 2021
Bittersweet Results
There’s been a noticeable uptick in the acquisition of single family homes by investors for the purposes of renting them out. Maricopa County, over the past 4 months, has seen an increase in these sales from 14% to 18%. This level of buying is, per the Cromford Report, the highest level of investor buying in 7 years.
The reasons for this are obvious. With the continued growth of Maricopa County, which just replaced Philadelphia as the 5th largest county in the nation, the demand for rental housing has soared. This has sent the average lease price per square foot to $1.39 (see chart below). Add to that the health of the sales market, in terms of lack of supply, and heady appreciation finds large and small investors alike further tantalized.
Owner occupant buyers have not been as willing to pay 25% or 30% over the values of last year, whereas these larger investor buyers are, in some cases, just blowing away the owner occupant buyer. The Bodeen Team has observed these aggressive investor buyers on a number of our sales recently. It’s dramatic.
What do large investors of rental housing look like? One company owns 660 properties. Another owns 385. The largest institutional rental owner in Phoenix owns 4000 non-apartment units! 15 years ago, the small “mom and pop” investors owned 100% of metro Phoenix rental housing. Smaller investors still dominate the local rental buying market, buying 3 out of 4 homes that are sold to investors, but now, with competition.
In one case, a North Phoenix listing of ours, was listed above recent comparable sales, priced at $360,000. 5 offers came in, all over list price. Then one offer, from a large investor, offered $400,000 cash with no contingencies and a 21 day close. In another transaction listed for $339,500 in Anthem, three offers in 3 days, all over asking price, no contingencies, non-refundable deposit, closed for $359,000 from an investor.
So, it’s easy to see how single family property owners benefit with higher values because of the competition. It’s just harder for the owner-occupant buyer, especially first time buyers, to get a foot in the door.
The bittersweet of all this on the one hand hampers owner-occupant buyers as they have to compete with buyer investors, and most often, it’s no competition. The sweet part of these buyers are that they purchase and turnaround and rent out the property, keeping or adding to the supply of rental homes. Renters benefit, while owner-occupant buyers often get aced out in the bidding.
Market data referenced in this article comes from The Cromford Report.