As real estate investment firms across the country calculate which markets to rush in to buy homes, homebuyers looking for a home are often left empty-handed.
While the companies claim to be responding to the community’s desire for more rental housing, Columbus experts say some of them employ predatory practices, charge too much rent and often exclude individual buyers looking for a home. a place in an already difficult market.
Rising interest rates and volatile stock markets may dampen sales a bit, but Central Ohio’s real estate market is in turmoil. The low inventory and the large number of buyers are causing bidding wars in the most popular neighborhoods.
US Census statistics show that Franklin County already has the lowest rate of owner-occupied housing in the state.
A state senator from the Cincinnati area recently introduced a bill which aims to slow investment firms as they buy thousands of single-family homes in select markets across the state and country.
Senator Louis Blessing hopes to advance a bill that would give individuals and nonprofits a chance to seize foreclosed properties before investment firms have a chance to bid on them.
Senator Blessing said the bill, unlikely to gain traction before the next General Assembly, is not a “panacea” that will solve the affordable housing crisis in excited markets. But, he said, the bill could potentially be bipartisan, making it easier for families to buy.
“When you are an owner, you can build up an intergenerational heritage, you can pass it on to your children. And that’s really how a lot of people move from poverty to middle class, and from middle class to upper middle class, and beyond,” Blessing said.
Blessing said that to build a strong family, Ohioans must have access to stable and affordable housing.
Senator Blessing hopes to hold a hearing before the General Assembly closes for the year, but expects to reintroduce the bill after it resumes.
Of Ohio’s 88 counties, no other has a higher tenant ratio than Franklin County. According to 2019 US Census figures, 53% of homes are owner-occupied, a steadily declining rate. In 2005, nearly 60% of homes in the area were owner-occupied. The county falls well below the state average for homeownership – 66%. Hamilton and Cuyahoga counties have the second and third highest percentages of renters out of 88 counties, but both have homeownership percentages closer to 60%.
The percentage of tenants in the county is only expected to rise as real estate investment firms, many of which emerged in the aftermath of the 2008 housing crash, focus their portfolios on growth in large and mid-sized cities with centers active employment and intense housing markets. , like Christopher Columbus.
“We know that as of now, about 20%, (or) 17% of all homes sold in Columbus now go to investors. And that’s an 85% increase over the previous year,” said Carlie Boos, executive director of the Affordable Alliance of Central Ohio. “And that’s $400 million in investments coming in from these types of investors. So this scale is truly unprecedented in the history of central Ohio.
Boos said companies like these target neighborhoods traditionally filled with homeowners with single-family homes worth between $200,000 and $300,000.
“It’s one of those hardest prices for working families to crack and it’s where those investors flex the most muscle,” Boos said.
Combined with rising interest rates, a limited housing stock and decades of underconstruction of new homes in central Ohio, Columbus Realtors’ April housing report found that the the area’s market needed more of these mid-priced homes to meet demand from everyday buyers.
So regular home buyers looking to buy in the area are finding stiff competition, especially in suburbs with good school districts that don’t have a lot of rental stock and also lack entry-level homes.
That puts homebuyers in the middle of a “feeding frenzy,” Boos said, in direct competition with deep-pocketed investment firms.
“It’s not a fair fight. When these companies can offer to close a house two hours after it appears on the internet, when they can pay cash, when they go to buy as is, without inspection, blind, when they are able to do that – a human being is going to lose every time against a Wall Street computer algorithm,” she said.
Janene Parham and Radhika Moore are real estate agents guiding sellers and buyers through Red 1 Realty’s feeding frenzy.
“I don’t know how homebuyers can compete with cash offers, closing in 10 days with no appeal. So when you do inspections and appeals, I mean…it’s a beautiful situation for the seller, but that’s horrible for a homebuyer,” Parham said.
Radhika Moore (left) and Janene Parham (right), real estate agents at Red 1 Realty in Westerville. [Renee Fox / WOSU]
Parham said businesses were swarming the listings. The two said a recent buyer, who had been in the market for a year for the right home, made a contingency offer that was $150,000 above the asking price. The woman still lost her offer to a company.
In April, homes on the Franklin County market were on the market an average of 11 days, up from 13 last year, according to Columbus Realtors.
Homes in some communities sell even faster. Blacklick homes in April were only on the market 4 days, down from 14 last year.
Moore said the big companies aren’t just pricing families looking for a home to live in, but also smaller, local real estate investors who are more in tune with local needs.
“There are some really good investors out there who really want to buy properties and fix them. They [charge] affordable rates for rental or purchase. We welcome them because we need them. But we’re talking about these investment firms that monopolize the industry,” Moore said.
Companies are often funded by bank loans of hundreds of millions of dollars, and the profits are usually sent out to the community, to shareholders and to debt repayment. Businesses can afford to offer more than the asking price, while other borrowers often cannot.
Moore and Parham are doing what they can to improve the situation, connecting buyers and sellers directly and warning sellers that deals with big companies aren’t as simple as they seem – they often contain hidden contingencies and other complications.
And, many of these companies are notorious for not meeting maintenance needs. Some sellers want to keep their former neighbors happy and preserve the character of the neighborhood.
Boos recommends that buyers and sellers contact housing advisers when browsing the market, to ensure their rights are respected. Homeowners can also be targeted by these companies – sometimes they lie to convince people to sell their homes.
Moore and Parham said real estate agents can also help.