A representative for Offerpad said most homes it sells are purchased by individuals, and that the geography of investor purchases reflects how property funds approach the market. “We have a diverse mix of customers that benefit from the ease and simplicity of our services,” the representative said. “Where investors choose to do business is a function of their strategy.”
Opendoor declined to comment.
While selling to property funds has clear benefits for iBuyers and their customers, it's yet another way some parts of the country are being deprived of affordably priced houses.
Investors accounted for more than 18% of all U.S. home sales in the third quarter, according to research from Redfin Corp., the highest share since at least 2000. Atlanta was one of the most popular markets, with investors buying 32% of homes sold during that period.
Bloomberg analyzed flips in census tracts where the median home value was between the 40th and 60th percentile — neighborhoods where properties should be affordable for regular families. In these parts of greater Atlanta, iBuyers were 60% more likely to flip homes to investors and other entities in predominantly non-White areas, compared with those where White people are in the majority. In metro Phoenix, where iBuyers flipped more than 4,500 homes last year, the rate was 41% higher. In greater Charlotte, the iBuyers were three times as likely to do the flips in non-White areas.
McDonough, Georgia, is a hot spot within a hot spot. Roughly 30 miles southeast of downtown Atlanta, it’s a city of about 29,000 where two-thirds of residents are Black. The population has surged over the last two decades, amid a suburban building boom. Much of the town sits in one of the ZIP codes where iBuyers are most active nationally, selling more than 100 homes last year, according to Bloomberg's analysis of the property records, which were compiled by Attom Data Solutions. About 70% of those houses went to investors, many without ever being listed.
Back in 2001, Nicole Prince was able to buy a modest, three-bedroom home there while earning $12-an-hour. She lived in the house for a few years, moved to something bigger nearby and kept it as a rental. Last year, Prince, who’s Black, decided to sell and turned to the iBuyers. Offerpad agreed to pay $191,000 — far more than she thought she’d get: “I was like, ‘What?’ You couldn’t say no.”
The sale closed in mid-September. About three weeks later, the house was scooped up by Tricon Residential, a landlord that buys and manages single-family rental homes, for $5,000 more than what Offerpad paid, according to data from Attom. It still nags her that it didn’t go to a young person or family of color — somebody that was starting out like she was two decades ago.
“I feel like I didn’t pay it forward,” she said.
Rental Shortage
While there’s growing concern about investors turning more and more homes into rentals, complaints about the rise of Wall Street landlords often skip over the complexity around the issue. For one thing, the vast majority of the country's rental houses are owned by small investors. For another, the U.S. is also facing a shortage of rental housing that has driven up prices and stressed family finances.
When a landlord buys a home from an iBuyer, they’re often adding a unit of rental housing to a market that desperately needs it, said David Howard, the executive director of the National Rental Home Council, a trade group. At the same time, the institutional players are offering homes in desirable neighborhoods to households without the cash for a downpayment, he said.