If there’s any theme that dominates my observations here, it is the need for perspective. Everything looks different in the reflected light of the heat of the moment; only in taking a step back can we get any sense of what’s really taking place.
About a month ago, the Arizona Republic published an article discussing the impact investors have had on the Phoenix Real Estate market. The primary takeaways …
- Investors are buying a ton of homes out here. And not just the folks with one or two investment homes, or even a dozen. We’re talking large hedge funds snapping up scores of homes at comparatively bargain prices.
- Investors hold about 20 percent of all the homes and condos here in the Phoenix market; in some ZIP codes, investors own one in every 3 properties according to the article.
- The investors have made it exceedingly difficult for buyers who need financing to be able to purchase
Though I’m a little skeptical about the 1-in-3 claim, the rest is consistent with what I’ve said here for quite some time. Investors have been the dominant force in this market since buying picked back up in the spring of 2008 after an absolutely brutal, gridlocked 2007.
What I wish I had at my fingertips is the percentage of properties owned by investors back in 2004, before the market went completely out of control. My hunch is the figure likely was lower than 20 percent. But my hunch also is that though lower, it may not have been significantly lower. Again, this is my own gut feel – I don’t have a way of jumping back in time to see what the numbers really were like.
The Phoenix area has been a popular market for investment for time immemorial. Sometimes the market validated that reality; other times, it seemed a little insane to own investment property here. Aside from the stupidity of 2005 (and the subsequent tumble), an investor with a longer time frame generally would see their properties gain in value while getting some cash flow along the way.
That’s what is happening again now. Those purchasing for the investment monoliths are saying the companies plan to hold the homes for five to seven years. There’s some concern expressed in the article about what might happen when the investors decide to unload their homes; I’m thinking there may be enough intelligence at play that a company holding hundreds of homes won’t dump them onto the market all at the same time. Just a little bit of common sense.
It’s easy to point fingers and turn the investors into the bad guys who are keeping would-be homeowners from being able to purchase. But the reality is they always have been a part of the Phoenix market and, during some periods, they have been the only constant in the market.