If You Sell a House These Days, the Buyer Might Be a Pension Fund

The Amber Pines at Fosters Ridge subdivision in Conroe, Texas, was sold to online property-investing firm Fundrise in December.

Jeff Lautenberger for The Wall Street Journal

A bidding war broke out this winter at a new subdivision north of Houston. But the prize this time was the entire subdivision, not just a single suburban house, illustrating the rise of big investors as a potent new force in the U.S. housing market.

D.R. Horton Inc. built 124 houses in Conroe, Texas, rented them out and then put the whole community, Amber Pines at Fosters Ridge, on the block. A Who’s Who of investors and home-rental firms flocked to the December sale. The winning $32 million bid came from an online property-investing platform, Fundrise LLC, which manages more than $1 billion on behalf of about 150,000 individuals.

The country’s most prolific home builder booked roughly twice what it typically makes selling houses to the middle class—an encouraging debut in the business of selling entire neighborhoods to investors.

“We certainly wouldn’t expect every single-family community we sell to sell at a 50% gross margin,” the builder’s finance chief, Bill Wheat, said at a recent investor conference.

From individuals with smartphones and a few thousand dollars to pensions and private-equity firms with billions, yield-chasing investors are snapping up single-family houses to rent out or flip. They are competing for houses with ordinary Americans, who are armed with the cheapest mortgage financing ever, and driving up home prices.

“You now have permanent capital competing with a young couple trying to buy a house,” said John Burns, whose eponymous real estate consulting firm estimates that in many of the nation’s top markets, roughly one in every five houses sold is bought by someone who never moves in. “That’s going to make U.S. housing permanently more expensive,” he said.

The consulting firm found Houston to be a favorite haunt of investors who have lately accounted for 24% of home purchases there. Investors’ slice of the housing market grows—as it does in other boomtowns, such as Miami, Phoenix and Las Vegas—among properties priced below $300,000 and in decent school districts.

“Limited housing supply, low rates, a global reach for yield, and what we’re calling the institutionalization of real-estate investors has set the stage for another speculative investor-driven home price bubble,” the firm concluded.

A bidding war broke out for the Amber Pines 124-unit rental-housing community built by D.R. Horton.
A bidding war broke out for the Amber Pines 124-unit rental-housing community built by D.R. Horton.

Jeff Lautenberger for The Wall Street Journal

The bubble has room to grow before it bursts, according to John Burns Real Estate Consulting. But it is inflating fast. The firm expects home prices to climb 12% this year—on top of last year’s 11% rise—and increase at least 6% in 2022, a period of appreciation reminiscent of 2004 and 2005.

That boom was different, fueled by loose lending that enabled individuals to speculate on home prices by racking up mortgages they could repay only if home prices kept climbing. The money party ended a few years later when home prices stopped rising. The ensuing crash wiped out $11 trillion in U.S. household wealth and brought the global financial system to the brink of collapse.

Financiers stepped in starting in 2011 and gobbled up foreclosed homes at steep discounts. They dispatched buyers to courthouse auctions with duffel bags of cash. Smartphones and tablet computers—new then—enabled them to orchestrate the land grab and manage tens of thousands of far-flung properties thereafter.

They dominated the market for a few years, accounting for about a third of sales in some markets and setting a floor for falling prices. There wasn’t much competition. Stung by losses, banks made it harder for regular home buyers to get a mortgage. Millions of Americans were underwater, owing more on their mortgages than their homes were worth, and unable to move.

Home-rental firms, including Invitation Homes Inc. and American Homes 4 Rent, thrived. Renting suburban homes proved so profitable that landlords hit the open market and added properties at full price once foreclosures dried up. Many now build houses explicitly to rent.

The coronavirus pandemic sparked a race for home-office space and yards. Occupancy rates reached records and rents are rising with home prices. The ecosystem of companies that service, finance and mimic the mega landlords is booming.

Burns counted more than 200 companies and investment firms in the house hunt: computer-assisted flipper Opendoor Technologies Inc., money managers including J.P. Morgan Asset Management and BlackRock Inc., platforms such as Fundrise and Roofstock that buy and arrange for the management of rentals on behalf of individuals and builder LGI Homes Inc., which now reports wholesale home sales to bulk buyers in its quarterly results.

Spring brought a fresh stampede of buyers.

The business of selling entire neighborhoods to investors is illustrated by the Amber Pines at Fosters Ridge subdivision in Texas.
The business of selling entire neighborhoods to investors is illustrated by the Amber Pines at Fosters Ridge subdivision in Texas.

Jeff Lautenberger for The Wall Street Journal

PCCP LLC, which typically invests in apartment buildings and office towers, said it bought rental-home communities in the Southeast, the start of a $1 billion pact with Calstrs, California’s $286.9 billion teachers’ retirement system.

Home builder Lennar Corp. announced a rental venture with investment firms including Centerbridge Partners LP and Allianz SE to which it and potentially other builders will supply more than $4 billion of houses.

Madison Realty Capital moved into rentals with clients that used to focus on developing apartment buildings and owner-occupied subdivisions. On Thursday, it closed a $110 million loan on a project in Los Angeles, where 220 of the nearly 700 home sites are being sold to investors. The original plans, derailed by the housing crash, didn’t envision any rentals.

“A lot of things that would have been for-sale housing are going to be for-rent housing,” said Josh Zegen, Madison’s managing principal.

Bruce McNeilage began building houses to rent out around Nashville, Tenn., in 2005. After the housing crash, his Kinloch Partners expanded into other Southeastern markets, flipping occupied rentals to bigger investors.

Kinloch was financed mostly by community banks in the cities where it rehabbed foreclosures and built rentals. These days Kinloch can borrow far more from Walker & Dunlop Inc., WD 1.57% a commercial real estate lender forging into suburban rentals. Mr. McNeilage’s problem is that others are bidding up houses and lots.

“I am boxed out,” he said. “There’s too many people chasing things and they’re willing to overpay. It’s silly money right now.”

 

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The Housing Market Is Roaring, but Lots of People Can’t Get Mortgages

Home for sale

Thomas A. Ferrara/Newsday RM via Getty Images

The mortgage market is humming, but getting approved for a home loan is as difficult as it has been in years.

Mortgage credit availability, a measure of lenders’ willingness to issue mortgages, is near its lowest level since 2014, according to the Mortgage Bankers Association, or MBA.

The tight lending environment illustrates a growing cleavage in the mortgage market: More home loans are being made than almost ever before, but they are going almost exclusively to borrowers with pristine credit histories and sizable down payments. Borrowers with credit qualifications that fall just outside the stellar category are finding fewer lenders willing to approve their applications. A segment of borrowers who would have qualified for a home loan early last year are now out of luck, deemed too much of a credit risk.

“Because mortgage credit is more difficult to obtain, it is a more competitive environment overall,” said Dr. Lawrence Yun, chief economist at the National Association of Realtors.

About 70% of mortgages issued in 2020 went to borrowers with credit scores of at least 760, up from 61% in 2019, according to the Federal Reserve Bank of New York.

The median credit score of borrowers approved for mortgages reached 786 in the fourth quarter of 2020, up from 770 during the same period in 2019.

Americans who want to break into the housing market this spring face plenty of other challenges. Home prices tend to fall in a slowing economy, but they have jumped during the coronavirus pandemic, keeping many families out of homeownership.

Home prices are increasing at the fastest pace in 15 years, propelled by a record-low supply of homes for sale and a flood of well-off workers looking for second homes or space for home offices. The median existing-home price topped $300,000 last summer and has stayed there ever since.

And mortgage rates, while still historically low, have risen meaningfully from last year’s record-setting lows, pushing monthly payments higher for would-be buyers.

The availability of mortgage loans plummeted as much as 35% year over year in 2020, when lenders wanted to protect themselves from making loans to borrowers who might lose jobs during the pandemic. The MBA’s mortgage credit index has drifted higher since last fall but remained about 31% lower in February than the same time last year.

“In one week last spring, jobless claims were in the millions,” said Tendayi Kapfidze, chief economist at LendingTree. “A borrower who was fine one week could be a much riskier borrower the next week.”

Lenders’ concerns about the financial stability of borrowers prompted them to increase verification of employment and income. Some borrowers were asked to sign statements affirming that they had no intention of requesting forbearance after being approved for a mortgage. Some lenders are asking that documents used in mortgage applications, such as bank statements and pay stubs, be no older than 30 days, where they once allowed them to be 60 days older or more.

Stricter credit requirements appeared most clearly at either end of the mortgage market. The average credit score for borrowers approved for Federal Housing Administration loans rose to 672 in the fiscal year 2020, up from 666 in 2019. FHA loans typically have lower incomes and smaller down payments.

At the same time, lenders upped requirements for jumbo mortgages, which tend to go to well-off buyers. Jumbo mortgages are too big to be sold to government-backed mortgage giants Fannie Mae and Freddie Mac, so banks often keep them on their own books and bear the risk of default.

Jeanne Griffin’s local credit union in Minnesota denied her mortgage application earlier this year. She said she was told her 713 credit score and the fact that her student loans were in pandemic-related forbearance disqualified her.

“They said if I had applied a year ago, I would have been approved,” said Ms. Griffin, who has close to $20,000 saved for a down payment.

The credit union encouraged her to begin making student-loan payments and pay off about $4,000 in credit-card debt before reapplying.

The meteoric growth of home prices has made some lenders reluctant to take on first-time home buyers or others they view as slightly risky. Lenders who were comfortable offering mortgages of $300,000 or $320,000 to borrowers with good-but-not-great credit histories might not be willing to lend the $350,000 or more now required to buy the same property.

Loan officers and underwriters weigh a handful of variables when determining whether to approve a mortgage application: employment history, income source, credit score and debt level, among others.

Strict lending requirements play an important role in keeping the housing market healthy. Making sure that borrowers can afford mortgage payments is key to limiting defaults. Ultraliberal lending policies, including loan approvals for people with spotty income histories or mountains of debt, helped spark the 2008-09 financial crisis.

Lending standards are unlikely to expand meaningfully until housing demand ebbs, economists said. The dearth of homes for sale means lenders can select only the best from an abundance of applications.

Still, credit requirements should loosen slightly this year as interest rates rise, drying up refinancings, said Mike Fratantoni, the MBA’s chief economist.

“Since lenders aren’t being flooded with calls to refinance, more of their resources can be used to reach out to first-time buyers for purchases,” Mr. Fratantoni said.

Refinance loans are expected to comprise 46% of the mortgage market in 2021, down from 59% in 2020, according to the MBA.

The post The Housing Market Is Roaring, but Lots of People Can’t Get Mortgages appeared first on Real Estate News & Insights | realtor.com®.

Football and Horror-ific Decor Clash To Create This Week’s Most Popular Home

most popular homes 4-2

realtor.com

Silver, black, and a healthy heaping of testosterone were the not-so-secret ingredients that made a suburban Maryland residence this week’s most popular home on realtor.com®.

And we have to confess, we love this dose of boldness in Baltimore.

The listing went viral on Twitter, as folks tried to puzzle through the decidedly creepy decor choices. Social media was split on whether the Gothic, Las Vegas Raiders-loving setup was an abomination—or an inspiration for living your very best life.

The current owner and genius behind the creation, Billy Nicholson, inherited the house from his mom, according to the Baltimore Sun. His journey to virality began with a bar out back that looks like a cemetery—and proceeded down a dark path from there.

“It’s basically my twisted imagination coming to life,” he told the paper. Now he’s moving in with his fiancée and selling the one-of-a-kind man cave.

Another distinctive vision on a much grander scale also made a repeat appearance on this week’s list. Shaquille O’Neal‘s Florida mansion is back on the market, after a previous sale fell through.

Besides those two homes, you also clicked on a $79 million penthouse in New York City, a quirky Ohio home with a replica of the Oval Office, and a place in the woods of South Carolina built to look like a medieval castle, complete with gargoyles.

We’re now ready to lower the drawbridge on all of this week’s most popular homes. Join us on a wild ride.

10. 240 Wendy Hill Dr, Alpharetta, GA

Price: $550,000
Why it’s here: Built in 1980 and remodeled into modern farmhouse, shiplap-shape, this charming four-bedroom home is move-in ready. Don’t miss the incredible combo mud and laundry room, wraparound front porch, and a private, fenced backyard.

Alpharetta, GA
Alpharetta, GA

realtor.com

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9. 2043 Stephanie Ct, Black Earth, WI

Price: $349,900
Why it’s here: This four-bedroom country retreat in the middle of Wisconsin sits on just over an acre and was designed for family fun.

The wraparound deck provides a wonderful spot for basking in the fresh air and soaking in the views. Inside, there are hardwood floors throughout, the great room has vaulted pine ceilings, and the walk-out rec room with built-in bar is primed for a good time.

Black Earth, WI
Black Earth, WI

realtor.com

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8. 3654 Creekview Cir, Stone Mountain, GA

Price: $300,000
Why it’s here: This stylish midcentury modern was built in the Atlanta suburbs in 1963.

The three-bedroom has since been transformed by its current owner, with upgrades and updates throughout. It sits on just under a half-acre, with a pool, outdoor living spaces, and easy access to the city.

Stone Mountain, GA
Stone Mountain, GA

realtor.com

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7. 9927 Giffin Ct, Windermere, FL

Price: $16,500,000
Why it’s here: A proposed sale of Shaquille O’Neal‘s massive estate fell through.

So the Hall of Famer’s 12-bedroom, 31,000 square-foot behemoth is back up for grabs. Located in a gated community, the 4-acre property includes 700 feet of lakefront.

Features worthy of a baller include an NBA-certified basketball court, a 17-plus car showroom garage, cigar and wine room, theater, walk-in safe room, and recording studio.

Windermere, FL
Windermere, FL

realtor.com

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6. 1523 Jacobs Rd, Martinsburg, WV

Price: $345,000
Why it’s here: Tucked on 2.5 wooded acres, this tidy, four-bedroom brick ranch sits close to shopping and the Maryland state line. Recent upgrades include a new deck, heat pump, walk-out basement, and man cave.

Martinsburg, WV
Martinsburg, WV

realtor.com

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5. 2 Park Pl, Unit Pinnacle, New York, NY

Price: $79,000,000
Why it’s here: What was once described as “one of the last great unclaimed spaces in New York City” is now a penthouse worth clicking on. The Skyhouse Penthouse spans the top five floors of the Woolworth Tower and has claimed a spot among the priciest places in NYC.

The interiors were awarded the “Best Apartment of the Decade” by Interior Design Magazine in 2015. From the jaw-dropping listing photos, it’s easy to see why. A swirling, circular library plus a 408-square-foot private observatory, are just a couple of the unparalleled spaces within this luxe penthouse.

New York, NY
New York, NY

realtor.com

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4. 253 E. Peace St, Canton, MS

Price: $249,000
Why it’s here: Built in 1880, this historic six-bedroom mansion just received a two-year renovation and features fresh paint as well as refinished wood floors.

Highlights include a wraparound porch and a roomy backyard, all within walking distance of historic Canton Square.

Canton, MS
Canton, MS

realtor.com

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3. 8405 Sanctuary Dr, Kirtland Hills, OH

Price: $2,475,000
Why it’s here: This six-bedroom mansion was built in 2000 and comes with one notable feature—an office designed as an exact replica of the Oval Office in the White House.

Kirkland Hills, OH
Kirtland Hills, OH

realtor.com

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2. 221 Collins Valley Rd, Walhalla, SC

Price: $219,900
Why it’s here: Complete with gargoyles, a tower, and a sword in the stone, this bespoke castle was built in 1995 and designed to be the stuff of someone’s medieval fantasies.

Today, the four-bedroom fortress on 3.22 wooded acres is searching for a new princess, and could become a short-term rental or a home base for a royal-loving buyer with an idiosyncratic aesthetic.

Walhalla, SC
Walhalla, SC

realtor.com

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1. 228 Townsend Ave, Baltimore, MD

Price: $225,000
Why it’s here: Raiders, horror movies, and partying are the three pillars of this eclectic suburban home. The creepy listing ricocheted around the web this week, as folks tried to figure out the brains behind its distinctive decor.

One man’s inheritance has painstakingly been turned into an eerie man cave celebrating the NFL’s Silver and Black, as well as classic horror flicks.

The highlight of the home is an intensely mirrored boudoir bedazzled with crosses. In addition to the framed jerseys of Raiders greats, you’ll spy spiderweb ironwork, Gothic chandeliers, and a bar with a cemetery theme out back.

Baltimore, MD
Baltimore, MD

realtor.com

The post Football and Horror-ific Decor Clash To Create This Week’s Most Popular Home appeared first on Real Estate News & Insights | realtor.com®.

Illuminate Your Yard with these Low Voltage Landscaping Lighting Kits

These low-voltage systems can light up your house's exterior.

These low-voltage systems can light up your house’s exterior. (landscape/)

Developing a lighting plan for your yard can be intimidating, especially when it comes to choosing the right lights for the right space. Low voltage or high? Soft lighting or bling bright? And how hard is it going to be to connect all these lamps? Don’t worry. We’ve compiled a few great suggestions below that will create a little heaven around your patch of earth.

The end product, featuring crackled glass, will look as though you hired landscape architects. Go ahead and let everyone think so.

The end product, featuring crackled glass, will look as though you hired landscape architects. Go ahead and let everyone think so. (hykolity/)

There’s so much to like here, starting with low-voltage LED lighting that won’t need replacing for as much as 23 years. Throw in a waterproof rating of IP65 and a durable aluminum casing, and this is a kit that really rewards you for your effort. And that’s another thing we like. It’s a pretty easy install, with foot step and wire connector.

It’s also built with alloys that resist corrosion, making it a particularly good buy in humid and wet weather environments.

It’s also built with alloys that resist corrosion, making it a particularly good buy in humid and wet weather environments. (LEONLITE/)

Designed to blend into a garden design during the day as well as night, these smartly crafted low-voltage pathway lights utilize an upgraded lens that sends out consistent light without that irritating glare found in uneven, beaming models. The high CRI over 90 assures a natural lighting effect that accentuates, rather than competes with, existing greenery.

A thick aluminum casing and glass lens are built to withstand even the northernmost climates.

A thick aluminum casing and glass lens are built to withstand even the northernmost climates. (ZUCKEO/)

This set by Zuckeo features a set of rotatable spotlights with a wide variety of possible applications. A 90 degree beam angle with a 270 degree adjustable head allows you to easily modify your lighting anytime you change your landscape design. No digging it up or even resetting, just twist and turn. The lights themselves do not disappoint. One more perk: should you run into any problems, Zuckeo’s customer service is exemplary.

These bulbs burn brightly, requiring you to use fewer of them, and thereby achieve less intrusion in your naturescape.

These bulbs burn brightly, requiring you to use fewer of them, and thereby achieve less intrusion in your naturescape. (SUNVIE/)

Want to jazz up your garden with lights but you’re afraid of the wires and installation challenges? Sunvie vows this 10-pack set will install in five minutes or less. Fast-lock connectors connect landscape lighting fixtures to the spike stands strategically placed throughout your grounds. No need for crimping, cutting, or splicing. Lights are rotatable and hardy, encased by thick aluminum and shatter-resistant dense glass around the 12W LED lights.

A thick aluminum body, anti-corrosion polycarbonate lamp cap, a tough lens cover, assures that rain and snow will not alter your lighting needs.

A thick aluminum body, anti-corrosion polycarbonate lamp cap, a tough lens cover, assures that rain and snow will not alter your lighting needs. (MEIKEE/)

For those looking for ambient light and a soft garden touch, the Meikee 7W spotlights are a perfect fit. Bright enough to cast embellishing shadows, they blend into your landscape as if they grew there. They offer a 270-degree adjustable head, with 45 degree beam angles, allowing for easy alterations when your creativity changes things up in the garden.