Of course this title can lead to many thoughts, but I am relating it to the current state of our Phoenix Real Estate Market. We have a severe inventory shortage where there are not nearly enough homes on the market for sale to satisfy demand. We’ve covered many times in the recent past about the reasons why so I won’t rehash that here.
What I do want to convey is how your line of thinking when you sell your home can really impact the market as a whole. Phoenix is one of the nation’s most competitive markets for a myriad of reasons. Investors want to be in our market and hold properties as long-term rentals since people want to live here.
When the recession occurred about 10-years ago, nobody was buying homes, largely due to financing being very difficult to obtain. This meant we had to stimulate the market. That happened and then real people started buying again. However, large institutional investors, corporate investment groups and hedge funds started buying up large swaths of local homes also.
At first, the plan was to hold for 5-years and then sell off. Well… the rental market was so strong here and these entities never sold off in bulk. Much of that inventory still remains in their control and have tenants in place. As price appreciation took off, others wanted to jump in, some being foreign entities from Asia, the Middle East and elsewhere.
Just about every time we place a client’s home for sale on the open market, at least one of the initial offers is from one of these bulk investor groups. Almost always cash, but also less than list price. Some of these groups have gotten more aggressive and speculative so their offer prices aren’t always far off anymore, which can seem tempting.
Here’s the ask… think about the long-term effects if everyone sold to an investor that was going to turn your home into a rental. We already have a historically low number of homes to sell so this behavior will only perpetuate the cycle.
We usually have the conversation with our clients and 99% of the time, they agree that an owner-occupant buyer will be best both short and long-term. They are emotionally invested into the transaction, which makes it harder for them to bail during inspections, and they’re willing to pay the highest prices for a home. Also, owner-occupants make more improvements and take care of the properties better over time. This means all around beautification for the entire surrounding community.
Every situation is different and your hired professional should be helpful in providing the necessary information for you to make the right decisions, but if you have younger children, when it’s time for them to leave the nest, you don’t want them to be forced into renting forever. The decisions around us today will impact our options tomorrow.