NOT WELCOME
OKC homebuilders not interested in investment sales to corporations
Big corporate investors with deep pockets are bulk buying new homes from builders across the country to rent out, disrupting already frazzled local housing markets by competing with everyday people looking for homes.
Oklahoma City’s top homebuilders want none of it.
Investors buying previously owned and occupied houses is nothing new, but Realtors say it’s become so prevalent it’s sending that part of the market spinning, pushing prices higher and higher, sidelining many regular people who want to buy a house to live in.
“Investors have the upper hand because they are financially able to either pay cash or secure financing with at least a 20% down payment, better equipped to bridge appraisal gaps, and they’re more confident offering on a property in ‘as is’ condition,” said Marc Cassens, an agent with Realty Experts Inc.
An appraisal gap is when a property appraisal comes in for less than an agreed-upon sale price, meaning the appraiser determined the home to be worth less than a lender was willing to loan someone to buy it.
However, a sale can proceed if the purchase contract includes an appraisal gap clause, which guarantees that the buyer will come up with the money to cover the difference. Investors are better able to do so than someone wanting a house for a home.
Any buyer with cash, rather than, or in addition to, a loan, has a big advantage, said Anya Mashaney, broker and co-owner of Spaces Real Estate.
“It’s not always investors, either,” she said. “Sometimes it’s a financially well-off family member or close friend who is able to finance the purchase with cash for the buyer.
“I’ve had buyers looking (for a home for less than) $250,000 in Edmond since 2019. I don’t even want to count how many offers I’ve written for them and
we haven’t won a single one.”
What’s new is the rush of investors to buy new homes to offer as rentals.
Builders have been turning to investors for bulk sales, but not in OKC metro area.
More than 25% of homes bought by investors in the fourth quarter of 2021 were brand new, up from 3% two years earlier, the Wall Street Journal reported, citing John Burns Real Estate Consulting LLC and the National Rental Home Council.
Top metro-area builders said they’re not interested in seeing the same thing happen with their new homes.
Homes by Taber, Ideal Homes & Neighborhoods, and Home Creations were the three most active builders here in 2021. Home Builder Executive, a trade publication, also listed all three among the Top 100 U.S. builders.
They are not looking to make bulk investment home sales, a whole street or addition at a time.
It wouldn’t be neighborly, said Erin Yarbrough, director of marketing for Ideal Homes, based in Norman.
Big buyers competing with investors? No thanks as matter of policy, Ideal Homes says
Ideal Homes “has a long-standing policy against investment groups buying homes within Ideal communities. This ensures home buyers aren’t competing with corporations,” Yarbrough said. “That being said, we understand there’s a critical need for a mix of housing options: multifamily rentals, singlefamily rentals, and single-familyowned homes.”
It’s not that renters aren’t welcome. Yarbrough said “a small percentage” of homes in Ideal neighborhoods are available for lease, but from local owners.
“Ideal neighborhoods have covenants through the homeowners associations that limit the number of singlefamily rentals within each neighborhood, and Ideal policies don’t allow us to sell blocks of homes to investment groups,” she said.
And it’s not like Oklahoma City and its suburbs have enough homes to spare, whether new or previously owned and occupied.
March ended with just an 18-day supply of houses for sale, a market still so tight that buyers keep paying more, sometimes way more, than sellers are asking, according to the Oklahoma City Metro Association of Realtors.
Selling to big investors would inject corporate buying power into the market to compete with individual buyers, reducing their position even further in a market owned by sellers.
“It’s critical for our market to continue to be able to sell homes at the most affordable price possible while offering amenities and options that homeowners want,” Yarbrough said.
“Allowing outside investors to buy homes available to the general public, (means) community suffers.”
At Ideal, she added, “We often say that we don’t just build homes, we build community.
“We can’t continue to focus on that holistic approach to home building if a majority of the homes in a neighborhood are owned by companies that may or may not take care of the homes, landscaping, and community.”
Home Creations, based in Moore, has no desire to see everyday people outbid by corporations, said MJ Farzaneh, chief operations officer.
“We are not currently open to investors as there is not enough housing supply to the normal consumer, so we want to help people in achieving their dreams of home ownership,” Farzaneh said.
Corporate buyers would exacerbate the housing shortage for would-be regular home shoppers, he said.
Oklahoma City-based Homes by Taber, which builds mostly for move-up buyers, as opposed to first-timers, has no interest in the investment market, said Lindsay Haltom, director of marketing.
“N/A,” she replied when asked about it via email, although she acknowledged there’s a place for investors who buy, hold and rent.
“Although owning a home is part of the American dream, everyone’s circumstances are different. It is appreciated that quality options are available to those that want to live in a single-family home but are not yet in the place to purchase their own,” she said.
Agents describe an ‘insane’ sellers’ market
With just an 18-day inventory of homes listed with Realtors, the first quarter ended with home sellers still in charge, driving sometimes desperate want-to-be buyers to extremes.
Other notable statistics indicating a hot market benefitting sellers include:
• On average, homes sold in March after just 20 days, a week faster than a year ago, for 101.2% of asking price, the Realtors reported.
• The median sales price was $256,000, an increase of 13.2% compared with March 2021, the Realtors said.
“Cash offers or full appraisal gaps with financed offers are king in this market,” said Kacie Kinney, an agent with Keller Williams Elite.
It’s rough out there for home shoppers. And a clock is ticking. Freddie Mac said mortgage rates hit 5% last week for the first time in a decade. Every increase erases borrowers’ buying power.
One agent in a Facebook group for Realtors said she had a buyer pay $42,000 above asking price — $450,000 for a house listed for $408,000.
Another agent she was working with three shoppers looking for homes for around $225,000 “who have offered $15,000 price gaps and offered over asking price and still lost several homes. This is absolutely insane.”
Another agent said she had a client who had made offers, with appraisal gap clauses, on seven homes in the $350,000-$400,000 range, with none successful.
Another one said a client had made five offers, $20,000 over asking price, on homes listed from $205,000 to $220,000, with appraisal gaps covered, willing to take properties “as is,” and: “None accepted.”
As wild and woolly as the market is, it will resolve the way it always does, Kinney said in her monthly marketing email blast.
“For those experiencing fatigue and frustration with today’s market, know that this is part of the normal market life cycle. The climbing home prices won’t last forever,” she said, noting that rising mortgage interest rates will tamp down demand somewhat. “What goes up must eventually come down.”