Across the US, there has been a longstanding problem with inventory. Over the past 10 years, inventory each year has been steadily decreasing. And the problem is likely to get worse moving forward because of private hedge funds buying up detached homes and townhomes. When hedge funds purchase properties, those homes are not likely to come back into the real estate market. They are gone for now, and probably for the long term.
Why? Because hedge funds hold onto their portfolio for up to 10 years, but when they decide to sell, it’s unlikely any of the homes in their portfolio will show up on your local real estate search engine. Because they have purchased homes in bulk and grouped them into asset classes to be traded among institutional investors, people are not going to be able to buy individual properties from that bundle.
These homes become part of the rental market for the long haul and are unavailable to prospective homebuyers. And because homebuilders across the nation cannot build fast enough to meet the demand and need for housing, it has caused a major shortage of inventory across the nation.
Because housing is becoming a scarce asset, hedge funds are willing to excessively overpay for homes on the front end, outbidding the prospective homeowner every time. And because they pay in cash, they are not affected by any interest rate hikes.
