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.
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.