Road gets even rockier for first-time buyers

Real estate investors buying homes as rentals

CHARLOTTE, N.C. » At her first meetings with clients, many hoping to buy a first home, Sarah Ortiz Hilton runs through a list of warnings.

They may have to offer tens of thousands of dollars over the asking price, only to have those offers rejected anyway, Hilton, a real estate agent, tells them. They might have to put up thousands of dollars in nonrefundable fees to get a seller to consider their offer. And if they are looking for a home for less than $300,000, they might be out of luck.

In part, her cautionary message reflects the redhot housing market, rising interest rates and limited supply around the country. But particularly in booming Sun Belt markets like Charlotte, N.C., it also reflects something else: the increasing influence of real estate investors buying up houses, especially at the lower end of the market, and turning them into rental properties.

In cities like Charlotte, that trend is exacerbating the shortage of houses for sale, driving up prices and putting homeownership out of reach for many first-time buyers, the biggest losers in today’s market. About 2.5 million households shopping for a first home will be shut out of the market this year, estimates Nadia Evangelou, senior economist with the National Association of Realtors. That amounts to 15% of all first-time homebuyers. In an already daunting market, investor purchasing is adding to the obstacles. Redfin.

And in some markets, especially in the relatively affordable Sun Belt metro areas, their share is far higher. In Charlotte and Atlanta, investors purchased more than 30% of the homes sold in the fourth quarter of 2021, according to Redfin.

Housing industry representatives note that these numbers, which define investors as any institution or business, represent purchases by smaller, local owners, too.

For decades, Marjorie Parker knew all of her neighbors in the east Charlotte neighborhood of Hidden Valley. Living there was not always easy from gang violence. But Parker found comfort in the strength of the community and the economically stable, middleclass life it afforded Black families.