Here’s why investors love KC real estate – and what it means for buyers
KANSAS CITY, Mo. (KCTV) – Buyers of traditional KC Metro homes are facing fierce competition from deep-pocketed investors.
It doesn’t matter where in the Kansas City area you are looking to buy a home; the housing market is red hot right now. It seems the rules of the home buying game have changed over the past few years, and there are certainly new players. Investors are increasingly active and first-time buyers trying to break into real estate find themselves overwhelmed.
In the old days, say, three or four years ago, if you wanted to buy a house, you might be competing with just one buyer, or maybe a few other families. You would consider several options, take your time to evaluate and finally make an offer. Often you could get the house for less than the asking price.
Those days are over, at least for now. Today, a buyer can compete with dozens of others, bid on the spot, and pay thousands more than the asking price.
First time buyers John Allen and Monica Wanniger have been house hunting for five months. They’ve looked at over 50 homes, but keep bidding higher.
“It’s just an emotional rollercoaster,” Wanniger said.
“This is madness,” said real estate agent Sherri Hines. “There’s just a frenzy that you can’t describe. The level of tension with buyers, agents, lenders and inspectors – there’s just a generalized level of stress that’s even hard to explain. »
How did we come here?
What happened to create this fierce competition? The lack of supply is partly responsible. But another factor is the investors. They weren’t really in the Kansas City market five years ago, but now they’re buying homes all over the United States.
“The investment community sees an opportunity in real estate,” said real estate agent Michael Pierce. “It’s easy for us to look at the numbers and say, ‘Wow! Homes have appreciated 11% this year, they are so expensive. However, the investment community considers these to be very good opportunities and long-term investment opportunities. That’s why they come and try to take as much inventory as possible. »
Investors have more buying power than the average buyer. They can offer all the cash, waive inspections, and buy starter homes. These houses are then transformed into rentals.
Real estate investors are buying a record share of homes. According to Redfin, investors bought 18.4% of all homes nationwide last quarter. And while no one keeps track of that percentage in Kansas City, buyers and real estate agents will confirm that investment buying is strong in Kansas City.
Marck de Lautour of SBD Housing Solutions isn’t surprised that institutional investors are here in Kansas City. He is a local investor.
“Yes, institutional buyers are coming in and buying as much real estate as they can,” de Lautour said. “It’s cheap land. Land is actually really, really cheap compared to the coasts of California, Florida and Las Vegas.
According to de Lautour, these investors get the most return from renting properties, and he doesn’t think that’s necessarily a bad thing. He says there’s a whole new way to invest in real estate without owning a home. You can buy into a real estate hedge fund and keep your options open.
“It’s work from home, the convenience of traveling to and from any market,” de Lautoru said. “If Google calls today and they have a job in Austin, Texas, well, maybe they want to go to Austin, and they don’t want to be tied to ‘Oh my God, I have to sell my home markets have fallen.
What awaits us
None of the experts we spoke to expect the supply of homes available for sale to improve anytime soon. Marck de Lautour thinks renting is the future for many Americans. Previously, investors focused on low-cost homes with affordable rent. But that is changing. According to Redfin, mid-priced homes are increasingly popular with investors, accounting for a record 32% of investor purchases in the fourth quarter.
So now investors are looking for the same homes as traditional buyers. Anything priced around $317,000 is now the hottest ticket. Hedge funds are taking over these homes with full cash offerings and waiver inspections. If they pay too much for a house, they believe they will get the difference back, and more, over the life of the investment.
“That’s why these big investment companies are doing it,” Curtis Jay said, “Because they know real estate is a safe bet for most people.”
But some wonder about the price to pay for communities. Kansas City real estate agent Curtis Jay worries about how out-of-town investors could change the fabric of a neighborhood.
“If there’s an out-of-state investor coming in, buying a lot of properties, it’s going to be an area full of tenants,” Curtis said. “Nothing wrong with that, but there’s a different kind of mentality, a different kind of look, this neighborhood can see.”
From everything we’ve learned, Kansas City is a new target market because our homes are affordable. Property values are rising and other investment markets, such as along the coasts, are being tapped. But this real estate game is for all of us, even if you’re not looking to buy or sell a house. Rising property values mean higher property taxes and higher rents.
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