Real estate prices have skyrocketed this year. Low-interest rates are one reason for this. Also, people have started to pile into what they consider affordable metropolitan areas, inland from the huge and expensive cities on both coasts. Some of the most expensive real estate in the country can be found around San Francisco and San Jose, in Los Angeles and in the New York City area. Smaller cities also offer what many new residents believe is a better quality of life, compared to the crowded, sprawling places they have left.
Ironically, prices have begun to spike in the places people went to avoid high real estate prices. Competition has become fierce in highly popular places like Boise, a place many west coast residents have started to call home. Affordability in these cities has begun to disappear, as home demand runs well ahead of supply.
Another reason it is hard to find affordable homes in some metros is that institutions have started to buy houses, either to flip for a quick profit or to rent for longer-term income. Realtor.com’s “Wall Street vs. Main Street: 10 Cities Where First-Time Buyers Are Battling Investors for the Best Homes” identifies where this is an acute problem. One conclusion of the study is that “The share of investors in the market hit the highest level since at least 2015, according to an analysis of deed records by Realtor.com.”
Many of the homes that institutions target are those most likely to appeal to first-time buyers. One competitive advantage these companies have is that they are often “all cash” buyers.
To identify the markets where people find it hard to buy affordable housing because of institutional competition, Realtor.com identified where those groups represent the largest portion of the buyer pool.
The city where this was highest in July was Memphis, where the institutional buyer base was 17%. The median listing price for homes in the metro was $249,000 in September, which is much lower than the $448,000 in nearby Nashville. The next city on the list is Birmingham, Alabama, where the institutional buying base is 16% and the median list price was $271,000.
Companies will continue to compete with individuals as long as prices are rising and profits are likely. They probably will become a smaller part of the competition when price increases start to flatten.
These are 10 cities where it is hard to find affordable housing:
| Metro | Investor Buyers | Median List Price |
|---|---|---|
| Memphis | 17% | $249,000 |
| Birmingham | 16% | $271,000 |
| St. Louis | 14% | $250,000 |
| Charlotte | 13% | $390,000 |
| Jacksonville | 13% | $370,000 |
| Phoenix | 12% | $475,000 |
| Oklahoma City | 11% | $277,000 |
| Indianapolis | 10% | $280,000 |
| Louisville | 10% | $250,000 |
| Las Vegas | 10% | $430,000 |
Click here to see which are the most expensive cities to buy a home in.
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