Lawmakers are beginning to look at ways to limit investor purchases
of ConsumerAffairs
Americans hoping to buy a home have been frustrated over the last couple of years, and many point to rising mortgage rates.
Theres no denying that 7% interest rates have eroded home affordability, but 7% isnt that high on a historical basis. But when homes cost $400,000 or more, that putsthe American Dream out of reach for many people.
There may be a few reasons whyhome prices went up so much but one that deserves discussion isbuying activity by investors. After the housing market crash of 2008 and 2009, investors began to buy foreclosed homes and convertthem to rental property, in effect taking them off the market.
That activity is still going on today. All you have to do is look at the monthly sales report from the National Association of Realtors (NAR). In March, sales of existing homes were down 3.7% from March 2023.
NAR reported that first-time buyers were responsible for 32% of sales in March, up from 26% in February and 28% in March 2023. All-cash sales accounted for 28% of transactions in March, down from 33% in February but up from 27% one year ago. All-cash sales are typically a sign of investors.
Its the combination of high mortgage rates and high home prices that reduce affordability for the average buyer. If investors, who pay cash, were removed from the equation, there would be less competitionand these pricesmight stop going up.
Public officials have taken note
The issue has caught the attention of some members of Congress from both sides of the aisle. The Wall Street Journal reports that homeowners associations have led the battle against investors invading neighborhoods and now lawmakers may be ready to join the effort.
Democrats in the House and Senate are taking it a step further. They have sponsored legislation that would force Wall Street investors to sell single-family homes to family buyers and have garnered some GOP support.
I strongly support free markets, Texas Republican Gov. Greg Abbott posted on X. But this corporate large-scale buyingof residential homes seems to be distorting the market and making it harder for the average Texan to purchase a home. This must be added to the legislative agenda to protect Texas families.
While support for the idea of freeing up more housing for owner-occupants is gaining some traction, there has been little in the way of action. None of the measures to rein ininvestors has made it to the floors of Congress or state legislatures.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-04-30 11:27:36
