One reason the housing market went wild last year

[Cruz Azul Guy]

Originally Posted by Camden Northsider

I dunno-- I agree having Zillow as a competitor likely exacerbated the selling conditions, but (unfortunately) large corporate homebuyers have been snatching up dozens to hundreds of Mpls properties long before Zillow entered the market. GA-based Havenbrook Homes has been particularly prolific here on the Northside-- when we listed in 2014 they submitted a competitive site-unseen offer (which was 1 of only 2 offers we received on that house-- we of course rejected their offer).

The foreclosure crisis on the Northside during the great recession was predominantly fueled by investors that included large/shady corporate buyers. One such group (TJ Waconia) actually concocted a mortgage fraud scheme involving purchasing/selling enough homes in the same neighborhoods that they were actually able to inflate local home values (https://www.justice.gov/archive/usao...sentenced.html).

So Zillow's recent experiment sucked for sure, but they were a late arrival to a party that's been here. I know there has been some advocacy with Mpls City Council for years to get them to regulate these types of transactions/ mass purchasing events (going back 2 different councils from the current)-- why they have not touched this issue which clearly impacts local affordability is beyond me.

Yes I’ve seem two different strategies at play for these corporate investors.
1 - flip and sell for profit
2 - buy up homes to rent out

There is a way to stop practice #2 and that is for people to stop renting single family homes. By doing so you’re giving these greedy investors a reason to continue this practice and gobbling up homes that would otherwise be purchased by families and first time homebuyers.

Cities that are seeing this get out of control could also consider increasing the fees associated with renting out a non-homestead property or for the fee to increase for every additional property within the same city. There are ways that this practice could be discouraged.

[Camden Northsider]

It really seems as simple as "if you own 10 non-homesteaded addresses at separate physical structures, or operate 10 different rental licenses-- you need to apply for a special waiver/permit to be approved for additional rental licenses and/or the purchase of additional properties will be subject to massive fees. 90% of local REO investors would likely not be affected by something like this (and most would likely welcome taking conglomerates out of local competition), and some additional scrutiny on local folks surpassing that threshold would not be a bad thing either.

[wamer27]

Originally Posted by Camden Northsider

It really seems as simple as "if you own 10 non-homesteaded addresses at separate physical structures, or operate 10 different rental licenses-- you need to apply for a special waiver/permit to be approved for additional rental licenses and/or the purchase of additional properties will be subject to massive fees. 90% of local REO investors would likely not be affected by something like this (and most would likely welcome taking conglomerates out of local competition), and some additional scrutiny on local folks surpassing that threshold would not be a bad thing either.

Yep, the landlords I deal with my company all have less then 10 units. One guy has probably close to that number or maybe more, but he leases them all to REM for group homes. He had his own company, but when funding was cut by the state, he sold the company, but not the homes.

[1AngryTaxPayer]

Originally Posted by Cruz Azul Guy

Yes I’ve seem two different strategies at play for these corporate investors.
1 - flip and sell for profit
2 - buy up homes to rent out

There is a way to stop practice #2 and that is for people to stop renting single family homes. By doing so you’re giving these greedy investors a reason to continue this practice and gobbling up homes that would otherwise be purchased by families and first time homebuyers.

Cities that are seeing this get out of control could also consider increasing the fees associated with renting out a non-homestead property or for the fee to increase for every additional property within the same city. There are ways that this practice could be discouraged.

Please. This is a capitalistic society. These theories and dreams are a waste of time. Either you bought at the right time or you didn't.

[St.Joan]

Wow. I had no idea Zillow did this!

[MN-Born-n-Raised]

Originally Posted by Cruz Azul Guy

One word - Zillow.

If anyone doesn’t know, there is a Real Estate marketplace company called Zillow. Recently this company began aggressively buying up single family homes (mainly ‘starter homes’) in a number of metropolitan areas, including the Twin Cities. This same strategy was undertaken by other companies such as OpenDoor and Offer Pad. The practice has been termed “iBuying.”

This is described in greater detail in this article:
https://www.bloomberg.com/news/featu...-buy-thousands

I can now see that Zillow engaged in this practice pervasively in the Twin Cities, fueling the insane seller’s market surge we saw during most of 2021. The anecdotes of people getting dozens of offers above listing price within days of listing their home was because real home buyers were competing with corporate investors. This is the dark reality of modern day real estate.

Zillow is now in the process of winding down their home flipping division (GOOD I SAY!) This is evident as you can see what homes on the market are owned by Zillow while using their app. I ran a search today and found that 105 homes listed in the Twin Cities metro area are Zillow-owned properties.

I’m not sure if others agree but I find this kind of disturbing. We have family and friends that have struggled mightily to buy a home in the area and it is kind of disheartening to realize that their misery was exacerbated by the actions of greedy corporations.

So if Zillow is winding this down and if others follow suit, I expect this will cause a market correction. How swift the correction will be is anyone’s guess.

Here are ALL of the reasons why Real Estate went crazy (It's a great article). Read https://www.forbes.com/sites/johnwak...h=7a0df0d66182

[wamer27]

I follow real estate all over the country in places I find interesting. Two giant things have come to be within covid starting. All properties on the north shore used to sit for months and months and sometimes years, now it’s good luck finding anything not already pending or contingent. Telluride Colorado homes were on market for years (cheapest house in the high end town is $2m). I realize these are secondary homes, but knew most were vacation rentals bringing in income each year while being listed for sale. It went from night to day and now you can’t find a home there that isn’t pending where majority are $5m or more. Why weren’t these homes selling 3 years ago?

[MN-Born-n-Raised]

Originally Posted by wamer27

I follow real estate all over the country in places I find interesting. Two giant things have come to be within covid starting. All properties on the north shore used to sit for months and months and sometimes years, now it’s good luck finding anything not already pending or contingent. Telluride Colorado homes were on market for years (cheapest house in the high end town is $2m). I realize these are secondary homes, but knew most were vacation rentals bringing in income each year while being listed for sale. It went from night to day and now you can’t find a home there that isn’t pending where majority are $5m or more. Why weren’t these homes selling 3 years ago?

That's the million-dollar question (pun intended). On our lake (one of the largest in the state), the last resale was in September. And currently, there is a single home for sale. Normally, there are about 20 homes on the market. For whatever reason, people are not selling. I'm going to predict if the economy gets tough again, the 2nd home market might drop pretty fast. I sawid "if" for a reason... It seems the government will rescue the economy from people suffering even a little. As in, recessions are no longer allowed. lol Even if we take on an extra $6T in debt.

[ArcLyte]

Originally Posted by MN-Born-n-Raised

That's the million-dollar question (pun intended). On our lake (one of the largest in the state), the last resale was in September. And currently, there is a single home for sale. Normally, there are about 20 homes on the market. For whatever reason, people are not selling. I'm going to predict if the economy gets tough again, the 2nd home market might drop pretty fast. I sawid "if" for a reason... It seems the government will rescue the economy from people suffering even a little. As in, recessions are no longer allowed. lol Even if we take on an extra $6T in debt.

I follow the RE market pretty closely too, and I think business is booming just about all over. This seems to be especially true with lake front property. Typically those properties are value locked and don't suffer from as much volatility as properties which are not on a lake. We're even seeing properties 25 minutes away from downtown (e.g. Prior Lake / Shakopee lake areas) going for millions of dollars. Some people seem to be turning these lake areas into their primary residences as covid has changed the way many professionals work.

New home starts are increasing in those 1st/2nd ring suburbs as well. Last week, KB Homes (national builder) reported their 1st quarter earnings and called out specifically that, "Market conditions are healthy, driven by a low supply of available inventory and favorable demographics, along with steady employment and wage growth." They also indicated that the backlog value of their homes (homes which buyers are under contract for but haven't been started) was at the highest levels since 2007. Other builders are saying the same thing, with DR Horton reporting something very similar in February during their quarterly announcement.

It really comes down to a tale of two economies. People who have been investing have been doing great over these past few years (A $10k investment in the S&P in 2020 is worth about 15k at the moment (a 50% increase on your capital), even with the S&P being negative this year so far), and more people seem to be investing their money. People who aren't invested are being left behind and are seeing their purchasing power erode as they get hit from inflationary effects across the board. It will be interesting to see where things end up; my guess is that the investor class will continue to remain prosperous (which also includes many labor unions, politicians on both sides of the aisle, workers and retirees with active investments) while folks who aren't invested will continue to get squeezed.