You may have noticed the housing market is booming in the United States. Houston is just one of many major cities across the U.S. experiencing a housing boom. Homes are in short supply and buyers are grabbing anything they can find.
It’s not just families selling their homes – property investors are selling, too. Property management companies like Green Residential are seeing an uptick in Houston investors looking for help to sell their rental properties.
People sell properties all the time, but this situation is a little different. More people are selling than ever before, and you might be wondering why. There are several main reasons investors are selling what should be a long-term investment, but the drastic increase is centered on the ripples of damage caused by the economic shutdowns.
The Houston Housing Market Is Hot
Houston’s housing market has been hot for a while. By the end of September 2021, Houston saw an 8% year-over-year increase in inventory. However, by the first week of October, new listings fell by 18.4%. Even so, new listings in Houston are still higher than they were in 2020.
Homes in Houston have been selling for thousands of dollars above asking price. Even when appraisals come in low, buyers are still paying more than the market price. For example, a couple listed their Houston home for $315,000, but had to renegotiate the price when the appraisal came in at $294,000. The buyer agreed to pay $305,000, which was still $11,000 above asking price.
When the market is hot, some investors can’t resist selling, although profit isn’t usually their main motivation. Many investors who choose to sell their rental properties have other reasons for selling.
Houston Investors Are Cutting Their Losses
The COVID-19 pandemic has created a bad situation for many property investors who can’t get their tenants to pay rent. The CDC’s eviction moratorium, which lasted over a year, prevented landlords from evicting tenants for not paying rent. During that time, property owners still had to pay their mortgages.
In April 2021, the Texas Supreme Court squashed the national moratorium and allowed evictions to resume. At that time, local judges were actually barred from pausing evictions. However, it was too late – the damage had already been done.
Now, investors who are behind on their mortgage payments are selling to cut their losses while the market is hot enough for them to get a good deal. The national moratorium has ended, but many landlords would rather cut their losses and walk away.
Large Corporations Are Paying Top Dollar For Properties
Another reason Houston investors are selling their rental properties is to cash in on high offers from large corporations like Blackrock. BlackRock and several other investment firms are paying anywhere from 20-50% above asking price. They’re essentially outbidding the average home buyer and pushing them out of the market.
While these investment firms aren’t buying every home they can find, they are buying the cheapest homes on the market. They’re not interested in multi-million-dollar mansions; they want the cheaper, single-family homes that need a little TLC. This is why many home buyers are struggling to find homes to buy.
With large companies depleting inventory that would normally be scooped up by the average working class American, there’s almost nothing left in their price range.
While property investors got a bad deal with the eviction moratorium, it seems like it might even out for some who can sell to a company like BlackRock. Some offers have been as high as $300,000 over asking price. For investors looking to break even with their losses, the temptation to sell to a company willing to pay high prices is immense.
The Housing Market Is In Limbo
Experts have made all kinds of predictions about where the housing market is going, but it’s hard to tell what’s really going to happen. There are several factors at play that most don’t consider, like the rapidly rising unemployment rate and problems with the U.S. dollar.
Investors Know There’s More To Come
Investors who know what’s going on beyond the surface are selling to avoid a much bigger catastrophe that could occur if or when the dollar collapses. They know that the petrodollar system has crumbled and that means bad news for the dollar and their ability to maintain their investments.
Since 1944, many nations have valued their currency based on oil trades in U.S. dollars. These nations have backed their currencies with oil. However, the entire scheme has been disrupted and Russia has officially ditched all U.S. dollar assets in its National Wealth Fund and has moved to holding euros, gold, and Chinese yuan.
Large Corporations Have The Capital To Weather The Storm
Individual investors don’t have the capital to sustain their investments through an uncertain and unstable economy like large corporations. For many investors, selling is the only way to protect their profitability now and in the future.