Who’s buying these homes around us? Where are they coming from? Great question and the answer is a result of many factors, some of which have been years in the making.
1. Since late 2016 we have seen an increase of out-of-town investors across the country coming to Birmingham picking up homes to be placed into rental portfolios.
2. The financial crash affected all generations differently; many millennials opted for experience of living over that of home ownership. With an increase in demand for rentals and low interest rates for investors, it wasn’t long before rental rates were higher than a mortgage payment for the same home. Thus, many logical minded millennials began their search for homeownership (marriage & babies probably helped some to start sooner).
3. We have seen record low interest rates which have provided a new level of affordability for homeowners which have given way to escalating sales prices. Homeowners realize with each passing month more equity, but even if it makes sense to finally sell, they still need to purchase. The seller’s market caused new construction to boom all over town but, it was nothing like the low inventory of today. Additionally, local investors have directly competed with retail buyers to flip a home – more buyers for the same home – by the time the rehab is complete, demand is even higher, and the price point of the home had increased. This also caused prices of non-renovated homes to escalate in price.
4. The effects of COVID brought the real estate industry to a quick stop, but it was only a quick one. COVID hit in March and by June, the housing market began performing as if it were making up for lost time. However, with schools in flux as to when & how they would operate, many homeowners opted to refinance and use the equity in their homes to perform renovations in lieu of moving. COVID’s effect on the number of workers coupled with a hindered supply chain has bottle-necked all industries. New construction has not been able to keep up with demand. Moratoriums on rental evictions have kept occupancy rates low. Forbearances for homeowners needing more time to make their mortgage payment has decreased the number of foreclosed properties available for purchase. The ability to work remotely caused a decrease in relocations. Some out-of-state companies have even begun to hire Alabamians to work remotely; employers and employees benefit from a decrease in expenses and an increase in wages.
None of these factors make up most of the market (new construction, foreclosure, & relocation sales), but they do collectively help the market to gain momentum into the next buying season. Next month we’ll discuss additional factors to watch in upcoming months to get a better understanding of our current local market and how it differs from the past. You can also follow us on social media for insight and tips all month long.