The Future of Housing Rises in Phoenix

[Pedestrian]

By Ryan Dezember and Peter Rudegeair
The Wall Street Journal
June 19, 2019 11:10 am ET

TOLLESON, Ariz.—Armed with loads of cash and the latest in machine learning, investors are reshaping the $26 trillion market for U.S. residential real estate, starting in Phoenix, the petri dish for America’s housing experiments.

At the edge of the city’s stucco sprawl, a beige, three-bedroom house with a gravel yard sold last month for $240,000. The seller, Opendoor Labs Inc., paid $215,000 for the house in January, replaced carpet and repainted, and put it back on the market.

A computer told the company what to offer and how much to ask. There was no need to schedule a showing with a real-estate agent. Prospective buyers of Opendoor homes can download an app to unlock the door.

Residential real estate has long been a fragmented industry. Renting, buying and selling a house generally means dealing with an assortment of local real-estate agents and local landlords, and working with the schedules of everyone involved.

Now companies such as Opendoor, among San Francisco’s flushest startups, aim to bring Wall Street-style efficiencies and Silicon Valley software to the housing business.

The house in Tolleson is one of several thousand around the city that Opendoor and two competitors—listings giant Zillow Group Inc. and Offerpad Inc.—have bought since 2014 in an attempt to perfect programmatic house flipping. Last year, they bought nearly 5,000 houses in the metro area, roughly one in every 20 existing homes sold. They’re after real-estate transaction fees and anything they can make on reselling the property. Margins are low, so volumes must be high.

They’re treading the path worn by another group of deep-pocketed investors after the foreclosure crisis: Wall Street firms that snap up suburban houses and turn them into rentals. The high-tech flippers often follow rental companies into neighborhoods, in the hope it gives them buyers of last resort should the housing market sour.

A couple of blocks from Opendoor’s sale in Tolleson is the first house that Blackstone Group LP bought in 2012 on its way to creating Invitation Homes Inc., the country’s largest single-family landlord. The three-bedroom house rents for about $1,200 a month. More than 40 of the subdivision’s 520 houses are owned by either Invitation or three of its rivals, according to tax records . . . .

https://www.wsj.com/articles/the-fut...d=hp_lead_pos6

[Pedestrian]

Investors Are Buying More of the U.S. Housing Market Than Ever Before
By Laura Kusisto
Updated June 20, 2019 7:12 pm ET

The share of investor purchases of U.S. homes have climbed to an all-time high, a sign that rising home prices have done little to dampen demand for flipping homes or turning them into single-family rentals.

Big private-equity firms, real-estate speculators and others that buy properties comprised more than 11% of U.S. home purchasers in 2018, according to data released on Thursday by CoreLogic Inc.

The investor purchases are the highest on record and nearly twice the levels before the 2008 housing crash. The investor interest poses a challenge for millennials and other first-time buyers who are increasingly looking to buy starter homes and are forced to compete with deep-pocketed cash buyers . . . .

Investors are an especially powerful force at the bottom of the market, where they often pay all cash. Investors purchased one in five homes in the bottom third price range in 2018, according to the CoreLogic analysis, up 5 percentage points from the 20-year average of less than 15%.

. . . many people in San Francisco and New York are priced out of buying homes where they live but are able to purchase an investment property in less expensive cities . . . .

https://www.wsj.com/articles/investo...p_wsj&ru=yahoo

[JManc]

These firms are squeezing average home buyers out of a lot of areas, not just SF or NYC. They offer cash on a house sight unseen faster than a prospective "normal" home buyer. Just to sit on it or flip it.

Fortunately, you can spot a flipped house pretty easy. Always look at the bathroom and kitchen. If it's just these areas updated with cheap clearanced shit from Lowe's, good bet the house was flipped.

[Steely Dan]

^ flipped properties aren't always a bad deal.

our building was flipped 20 years ago by a developer who bought (probably for peanuts) a mostly-destroyed 3-flat that was a known "drug house" in the neighborhood and gut-rehabbed it down to the masonry shell, and probably did pretty well for himself in the end. so we live in a 100 year old brick structure, but with modern plumbing, electrical, and HVAC, which is nice.

the only thing they noticeably cut corners on are the windows - cheap vinyl affairs that leave a lot to be desired, but i understand why. our building has 65 double-hung windows (most are relatively narrow and ganged together, as was the style 100 years ago), and replacing that many fucking double-hungs with a quality window product such as Marvin would have cost over $50,000 and probably blown the re-hab budget out of the water.

a high quality operable window costs a lot, and in older chicago properties it's almost always the 1st thing that flippers will cheap out on because the vinyl crap is like a 1/4 of the price and still sorta does the same job (even if they look bad to a discerning eye).

[Angalfaria]

I think the future of housing in the Phoenix are bright.

[montréaliste]

Good luck trying to sue one of these big time flippers for hidden defects or shoddy renos. They must have addenda to the sales contracts that will suck the air out of a blimp.

[M II A II R II K]

Perhaps they should mandate that they all have solar roofs.

[JManc]

Originally Posted by Steely Dan

^ flipped properties aren't always a bad deal.

our building was flipped 20 years ago by a developer who bought (probably for peanuts) a mostly-destroyed 3-flat that was a known "drug house" in the neighborhood and gut-rehabbed it down to the masonry shell, and probably did pretty well for himself in the end. so we live in a 100 year old brick structure, but with modern plumbing, electrical, and HVAC, which is nice.

That I actually am ok with. They picked up a property decades ago that otherwise was hopeless and took a chance on it and it paid off. Saving the building and investing in the area.

[Pedestrian]

Originally Posted by M II A II R II K

Perhaps they should mandate that they all have solar roofs.

Oh, hey . . . as usual, California is way ahead of you:

California’s Rooftop Solar Mandate Wins Final Approval
JULIA PYPER DECEMBER 05, 2018

It's official. All new homes in California must incorporate solar power starting in 2020.

The California Energy Commission passed the measure in May as an update to the state’s 2019 Title 24, Part 6, Building Energy Efficiency Standards. On Wednesday, the California Building Standards Commission (CBSC) signed off on the plan — a first of its kind for the nation.

The new standards require that all new homes under three stories high install solar panels starting January 1, and that solar systems must be sized to net out the annual kilowatt-hour energy usage of the dwelling. The codes also incentivize “demand-responsive technologies," including battery storage and heat pump water heaters. Combined with a host of other energy-efficiency upgrades, the revised building codes are expected to slash energy use in new homes by more than 50 percent . . . .

https://www.greentechmedia.com/artic...oval#gs.n7rv93

This is a change in the building code. It definitely applies to new construction. Generally building codes also apply to major renovations--those requiring a building permit--but I'm not sure if this does. If not, I'm betting it's only a matter of time before there will be legislation to make it apply (and probably state subsidized loans to help people comply as with the earthquake retrofit mandates).

[dc_denizen]

What a wonderful future, making housing more expensive for low end buyers

[sopas ej]

Originally Posted by dc_denizen

What a wonderful future, making housing more expensive for low end buyers

But the price of solar panels has been going down, no?

[dc_denizen]

I meant the flipping, not the solar

[dubu]

there is not much info but a lot of money is going to a new city thats going to be real close to phoenix. its sounds like it will just be another phoenix, sometime in the 2020's it is said to start making a city for rich people or something.

[Obadno]

Originally Posted by Pedestrian

https://www.wsj.com/articles/the-fut...d=hp_lead_pos6

Why in the hell would you pay 240 for a 3 bedroom in Tolleson??

The buyer is probably another investor because there is no reason to spend that much on a modest home in the far west valley.

[Obadno]

Originally Posted by dubu

there is not much info but a lot of money is going to a new city thats going to be real close to phoenix. its sounds like it will just be another phoenix, sometime in the 2020's it is said to start making a city for rich people or something.

A new city? A new Phoenix?

No its a suburb, one that was founded 90 years ago and was one of many random farm communities through the area that are now Phoenix suburbs.

It is near the confluence of a couple of new highways and is currently a high growth area of the Phoenix Metro due to available land and highway access. Nothing special, and as far as suburbs go its not too far out from city center. Hard to explain exactly but due to mountains and Indian reservations this part of the metro has been hard to get to for a long time and remained largely undeveloped relative to other parts.

Are you talking about the Bill Gates land buy? yeah that smart city nonsense is just that, nonsense, its Bill Gates REIT and he bought a bunch of land west of the city where the prospective I-11 will meet with the I-10. Its just land banking.

[dubu]

Originally Posted by Obadno

Are you talking about the Bill Gates land buy? yeah that smart city nonsense is just that, nonsense, its Bill Gates REIT and he bought a bunch of land west of the city where the prospective I-11 will meet with the I-10. Its just land banking.

ya, billionaires i thought were putting money into it to start building a brand new city.

[Obadno]

Originally Posted by dubu

ya, billionaires i thought were putting money into it to start building a brand new city.

LOL more like its a nice thing to smack on a brochure to the senior living developers of 2040. You cant just build a new city 50 miles from an existing one in a dry wash like the Hasayyampa "river" Its nonsense. Just meant for land investment. The most it will ever be is Phoenix's version of like Santa Clarita or Victorville

[dubu]

Originally Posted by Obadno

LOL more like its a nice thing to smack on a brochure to the senior living developers of 2040. You cant just build a new city 50 miles from an existing one in a dry wash like the Hasayyampa "river" Its nonsense. Just meant for land investment. The most it will ever be is Phoenix's version of like Santa Clarita or Victorville

it will probably be built in the 30's or 40's. its at 2% in planning. so i guess we can forget about this city for now.

http://smartcityaz.com/

[wwmiv]

Originally Posted by dubu

it will probably be built in the 30's or 40's. its at 2% in planning. so i guess we can forget about this city for now.

http://smartcityaz.com/

You mean 2% in “Panning” don’t you?



https://imgur.com/gallery/9j4NNCY

[azliam]

Originally Posted by Pedestrian

https://www.wsj.com/articles/the-fut...d=hp_lead_pos6

Invitation Homes...

The worst of the worst when it comes to property management.