Companies with cash are outbidding people who want to own a home as well as driving prices up. They are outbidding families for homes. Steven Fernandez of Substantia Realty says 'REITs' or Real Estate Investment Trusts - are snapping up a lot of inventory.
"A Big REIT will take a smaller return on investment because they are making such a huge investment on lots of homes. If they can get 3% or 5% they are happy because they are looking at a long term investment. He says millennials who want to take advantage of current low interest rates are finding obstacles. "There are still a lot of millennials who still want to purchase homes - and they have been told this is a great time to make the move. But it doesn't make it an easy move if they have to go up against cash offers." Some groups are turning properties from single-family home owners to rental property.
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Sometimes bidding wars break out. REITs are even buying up neighborhoods with cash and selling them to developers. Fernandez says he has seen it in his own business. "We had a listing in Sugar Land. We had 37 offers - and 30 of them were cash. The house wound up selling for $23,000 over list price!"
Fernandez says this could end badly with millennials who can't compete with cash buyers.
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REITS are buying up properties with cash, pushing prices up and dwindling the number of homes families can buy.