The more iBuyers sell to investor landlords for rental housing, the less single-family housing there is for individual buyers.

Collapse of ZillowOffers Points to Tight Relationships iBuyers Have with Institutional Investors

Announcing the closure of Zillow’s iBuying operation, ZillowOffers, plus Zillow’s offer to institutional investors that it was selling off its thousands of homes in its iBuying inventory sent different kinds of chills up and down individual’s and businesses’ spines.

On the pro side of the spine, some institutional investors, landlords and rental operations were ecstatic to have a crack at picking up roughly 18,000 homes they could then turn around as single-family rentals.

Some of these institutional landlords such as Cerberus Capital Management, KKR & Co., andTricon Residential have already purchased large quantities of ZillowOffer’s single-family home inventory.  Just this last week, the second-largest single-family landlord in the US with more than 70,000 homes, Pretium, agreed to buy 2,000 homes among this now defunct iBuyer’s inventory.

Zillow is not the only tech-based home-flipping operation to sell to Wall Street landlords and investors rummaging around for potential rental houses in this inventory-starved housing market.  According to an analysis by Bloomberg, ZillowOffers, Opendoor, and Offerpad have sold more than 20% of their respective homes to investors this year.

Bloomberg discovered that these three largest iBuyers sold more than 5,800 properties to entities affiliated with institutional landlords by sifting through thousands of property records from ATTOM Data Solutions.  Opendoor accounted for roughly 3,400 of those sales, Offerpad accounted for 21% of its sales to institutional investors and Zillow accounted for 19% of its sales, excluding the recent Pretium transaction.

On the con side of the spine, Mike DelPrete, a real estate tech strategist and scholar-in-residence at the University of Colorado Bolder, said, “The bigger that number gets, the worse I feel about it.  I get that there are business considerations.  Zillow flicking off thousands of homes at a time makes sense as a business.  But this is more than a business, this is housing.”

More Scrutiny of Relationships with iBuyers and Institutional Investors

As both iBuyers and single-family investors seek to accelerate their respective growth, more eyes are focused on the connections iBuyer companies and institutional investors have.

Already, both sides of these single-family home players are taking the defensive.  Politicians on both sides of the aisle are focusing on Wall Street’s role in housing.  Democratic Senators sent a letter to Rich Barton, Zillow’s CEO, asking about the number his company has sold to Wall Street firms and about the company’s plans to sell its remaining properties.

A Zillow spokesperson said that the company was “in close communication with” these senators and is pulling together information about how the company intends to wind down its iBuying business.  Likewise, a spokesperson for Pretium stated that the company “provides a high-quality housing experience through consistent, dependable and attentive service at our well-maintained and affordable homes.”

David Howard, executive director of the National Rental Home Council, said, “There’s a demand for rental housing and there’s not enough of it.  Whatever companies can do to bring more supply online, I think that’s a good thing for rental housing and it’s absolutely good for renters.”

Meanwhile, who is speaking on behalf of potential homebuyers who want to build their wealth via housing but can’t compete with all-cash investor buyers and who have been/continue to be priced out of the housing market?  Who is speaking for the real estate professionals who earn their livings by guiding and advising individual home buyers and home sellers?

Thanks to National Mortgage News and Bloomberg.



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