Although the market is slowing down from its rapid-fire sales pace, buyers won’t be catching a break, according to a brand new survey from John Burns Real Estate Consulting released on Tuesday.
The Burns Resale Housing Market Index, which is based on a survey of more than 6,000 real estate agents in 497 markets, measures current resale home sales, expected resale home sales for the next six months and the future balance between supply and demand.
The RHMI opened at 75.5 out of 100, which means the resale market is still expanding despite skyrocketing home price growth and inventory shortages. The July resale home sales pace is slightly “better than normal” at an index of 65; however, the pace is predicted to speed up over the next six months, with the expected resale home sales index at 83.1.
Credit: John Burns Real Estate Consulting
The imbalance between supply and demand will continue, the survey revealed, as the number of “motivated and qualified buyers” outweigh the number of potential sellers. “Buyer competition remains fierce, with 59 percent of contracts receiving multiple offers nationally,” the survey read.
The survey also included in-depth, first-person feedback from real estate agents who are struggling to overcome fatigue, win bidding wars, help first-time buyers enter the market, all while navigating the pandemic-induced changes to the housing market.
“Agents feel [fatigued] as they compete for listings against a new generation of agents willing to work for less, and their buyer offers are so frequently rejected,” read one of the agent sentiment insights. “Bidding wars continue, with some agents reporting a downtick due to overpriced listings.”
“Fatigued buyers feel housing is a losing game today and exit the market. Current conditions challenge first-time buyers most, who compete with cash offers and prowling investors,” it added. “VA and FHA buyers struggle to secure homes in every top market.”
John Burns | Photo credit: John Burns Real Estate Consulting
In a phone call with Inman, John Burns Real Estate Consulting CEO John Burns said the agent feedback “was the most interesting part” of the survey, as many wrote lengthy responses about their current struggles beating out cash buyers and institutional investors.
“The commentary over and over again was that entry-level buyers are losing out to cash buyers, which when you look at these comments, it’s investor activity. Cash is king,” he said. “VA and FHA buyers who need a mortgage and need the appraisal to come through are struggling.”
“That was a clear message to me there, particularly in the southeast where investors are playing a very big role in the market particularly below the $300,000 price range,” he added.
Although the wider public is just now discussing it, Burns said institutional investors have been quietly snapping up hundreds of homes at a time since the early 2000s. “We were one of the first [research firms] to sound the alarm in 2004 of just how much investor activity was going on in Fort Myers, Las Vegas, Phoenix and some of the markets that got totally overheated,” he said.
Burns said he has at least eight clients who are purchasing at least 500 homes a month, all in the hopes of turning them into single-family rental properties with a minimum rent of $1,500 to $2,500. “They’re not going below that, because that tenant is tougher to make money on,” he explained.
The investor craze isn’t going away anytime soon, as Burns said there’s “a lack of opportunity to get yield in the bond market here or anywhere in the world.” A boost in inventory wouldn’t help everyday buyers, he added, as more inventory would only encourage investors to increase their buying capacity.
“So the Realtors feel like supply is very restricted because they have more competition than ever before to get a listing,” Burns said. “But if there was more supply on the market, I also think you’d see investors buying more homes because there’s just an insatiable appetite for rental housing right now.”
“Investors won’t be slowing down at all,” he added. “They’re only accelerating.”
