As more urban dwellers moved to small towns with affordable home values, investors moved with them. In many smaller towns, more first-timers are losing bids to cash investors.
NEW YORK – Deep-pocketed investors are snapping up properties throughout small-town America, frustrating homebuyers who increasingly lose out to their all-cash offers.
One of those buyers is Dominic Pollock from Bethlehem, Pa. He and his fiancé have viewed more than 50 houses and made more than 20 offers on houses over nine months. But they’re constantly getting outbid, despite bidding above asking price. The couple bid $20,500 above asking price on a house this week and waived the right for a home inspection. But the result was the same. Their real estate agent received an email back from the listing agent: There were 14 bids and they had lost out again.
“There were days that I came home crying,” Brooke Terplan, Pollock’s fiancé, told The Wall Street Journal about her frustration over rejected bids and the couple’s inability to find a house before they get married. “A couple people told us that it was going to be tough,” Pollock added, “but we couldn’t even fathom what we’d walk into.”
Small-town America is seeing the same bidding wars that have become the norm for most markets. Local homebuyers find themselves increasingly up against investors, who comprise about a fifth of annual home sales nationwide.
Investors are being drawn to smaller towns because home prices and taxes tend to be lower – and the cash flow opportunities in buying properties to rent out may be greater than in the city. As a result, individual homebuyers are finding it difficult to compete. Investors often offer an all-cash sale with no inspections and may make “sight unseen” offers, and they do it quickly.
This unusual housing demand in small towns has caught local homebuyers off guard.
For example, the median list price for a house in the metro area surrounding Allentown, Pa., surged 24% in January compared to a year earlier, according to realtor.com data. Martin, Tenn., a small town 150 miles outside of Nashville, is seeing median asking prices climb 159% over the same period. In Kendallville, Ind., about 30 miles outside of Fort Wayne, prices jumped 56%.
Buyers are feeling the pressure to make quick decisions if they are to have any shot at competing against investors or other buyers. As a result, more buyers are waiving inspections in their bids and making other concessions.
“If you’re a buyer, this is the most frustrating time,” Jonathan Campbell, vice president of DLP Realty in Bethlehem, told The Wall Street Journal.
Source: “Real Estate Frenzy Overwhelms Small-Town America: ‘I Came Home Crying,’” The Wall Street Journal (May 20, 2021)
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