Absentee homeowners are crowding the housing market, data shows
S E E D E D C O N T E N T
Secondary-home and investment-property buyers are a rising share of homebuyers in many major cities, real estate data shows, and experts say the effect these deep-pocketed shoppers are having in housing markets is muscling out first-time homebuyers.
The share of homes sold to absentee owners — people in the market for properties that won't be their primary residence — has increased since 2020 in 228 out of 307 ZIP codes across nine major metropolitan areas from Seattle to Charlotte, North Carolina, an NBC News analysis of data from real estate data provider ATTOM found.
Through December 2022, absentee sales in most of these areas remained higher than before the pandemic. With deep inventory shortages, experts say this has changed the rules of the game — propping up prices and keeping competition tight.
"[Absentee owners] have cash, they have knowledge, they're not as concerned about what the home looks like if they're not living in it," said Tiffiney Graham, a realtor with Keller Williams River Cities in Columbus, Georgia.
Cash offers are typically a calling card of wealthy, seasoned buyers, experts say, often overlapping with investor and second-home buyer presence.
"We have some stat in our reports that 75% of all investor purchases are done with cash," said Sheharyar Bokhari, a senior economist at Redfin.
Ryan Pavlich, a marketing analyst in San Antonio, spent 18 months trying to buy a house beginning in 2018. Pavlich, 29, said he placed offers on nine homes, including a three-bedroom starter home with a new fence that he offered $5,000 above asking price.
He was beaten on all of them.
"Each time we lost out, the common denominator was cash," Pavlich said.
In each of the nine metro areas NBC News analyzed - Atlanta, Austin, Baltimore, Charlotte, Detroit, Miami, Phoenix, San Antonio and Seattle - a larger share of cash sales went to absentee owners. In San Antonio, 82% of absentee purchases have been made in cash since 2018, compared to 52% of owner-occupied sales.
Pavlich said he watched as sold homes he had bid on resurfaced as rentals. "My fiance's parents sold their home to Zillow — we saw it for rent less than a month later," Pavlich said.
Absentee buying increased in 40 out of 55 San Antonio ZIP codes with measurable buyer activity. Often, the greatest increases occurred in entry level-priced areas.
Most of the homes Pavlich looked at were in the $200,000 — $300,000 range — a category of home that is quickly disappearing. In 2019, 52% of new homes sold in the South were priced under $300,000, Census Bureau data shows. By 2022, that figure was 13%.
In Bexar County, Texas' 78250 ZIP code, where Pavlich searched and where the median home price is $236,500, the share of absentee sales nearly doubled. It increased from 19% in the two years before March 2020 to 34.6% in the time since.
Across San Antonio, the 10 ZIP codes with the largest increases in absentee purchases had median sale prices ranging from the mid-$100,000s to the lower $300,000s.
While Federal Reserve Chair Jerome Powell expected a reset of the housing market, these decreases have not materialized. Instead, aspiring homeowners face continued high housing prices on top of high-interest and mortgage rates.
For wealthier, cash-holding buyers, mortgage rate rises may be a boon.
The mortgage rate changes slowed the market and created a window for buyers already there, Bokhari, from Redfin, said, such as mom-and-pop outfits looking to buy a rental property.
And as increased mortgage rates swept competition out of the market, those buyers can continue to make the same offers, Graham, the Georgia realtor, said.
For some, the pressure has been too much. Hannah Quinn, a stylist at Madewell in Nashville, spent four months looking for a house in 2022 before giving up and deciding to rent.
"I've seen out-of-town investors, AirBnB owners, people who moved out of the city, but wanted to keep a property on the side for passive income," Quinn, 24, said. "It's so cutthroat that buying a home is not on my radar anymore.
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It's enough to make a person looking to buy a home to live in immigrate to Mexico.
I grew up in a fairly good working class neighborhood that was 95% three deckers and at the time maybe 5% were owned by absentee landlords and you could pick them out by the lack of upkeep. Now forty+ years later 80% of that neighborhood is absentee landlords and it's a slum. Not just because of the homes being rundown but because without a daily landlord presence the 20% of tenants who live and act like animals have no landlord to police their conduct. Investors definitely gravitate to dated or rundown properties because they'll be 30% or more cheaper to buy but rent for almost as much as a nice house plus it's going to end up rundown anyway so why spend the extra money. The saddest thing for me is the destruction of Porches, most of these three deckers had front and side porches and I love a second or third floor porch but they sag after a while and can be costly to jack and shim so the absentee landlords just tear them down. Since most of these houses are 120 years old or older the city should make that illegal as it changes the character of the property and neighborhood. As a sidenote these old three story buildings are framed with chestnut and it hardens like iron, you can't pound a nail into 100 year old chestnut but it's strong as hell. The 2x4s are a true 2x4 and you can take an 8 footer and prop the ends on blocks and a full grown man can stand or jump on the center and it will not bend or break unlike todays 2x4s.
There have always been two problems with the housing market. Both created by government.
First was the Federal Reserves policy of keeping the Prime Lending Rate so very low for so very long.
Second was the government's pressure on lenders & banks to reduce lending standards. (The real reason for the financial/housing crisis of 2008)
Once the government gets out of the way of the free market, housing prices will drop to where they probably should be, investors will stop buying up property and young couples, who qualify, may once again be purchasing homes.
I bought my first home on the GI bill in the 1960s. The cost was $16,000 and the payment was $99 a month including taxes and insurance. I figured out at that time that I wanted to invest in property and not the stock market. I still have that home.
There have been ups and downs in the housing markets for generations.
Think of what that house is valued at now. If you ever do try to sell it, you'll have an enormous capital gains tax.
There have been ups and downs in the housing markets for generations.
Since the mid 80's home values have skyrocketed. Three family homes where I grew up once cost the same as you paid in the 60's. They now have values of $800,000 to $1 Million. The law of supply & demand didn't do that. Government policy did it.
I know exactly what it was worth in early 2022 which is why it's in trust along with a few other pieces of property.
Some government policies add to cost but currently what is driving the prices is the shortage of units for sale.
The shortage of units is driven by an artificially high price stemming from the once insane idea of trying to grant homeownership to people who could not afford to pay for homes. Now they are out of the reach of people who should be able to buy them.
Actually no, that isn't correct, how do you explain the increase in housing costs before the 2008 meltdown and how do you explain the current increase in housing?
Per every expert it's a huge shortage of homes for sale that is driving prices up.
Actually it is correct.
If you want to take the time to understand it, you can start here:
No it isn’t, the article was written in 2009 during the meltdown. That was 14 years ago and many on the points they were making have been addressed. The US is short around 3.8 million homes supply and demand, Vic. The rental market is in even worse shape. As I stated earlier govt policies have an effect but to blame todays home prices entirely on that simply isn’t accurate.
Same thing happening here in Australia in the capital cities. In the local suburbs where I live there are numerous single mums with a couple of kids sleeping in car in shopping car park. Extreme lack of affordable rental units available. Charities are doing their best, but they are up against it.