For Lou Brown, a Realtor with a firm in Midtown St. Petersburg, it used to be unusual to represent a prospective buyer who lost their desired house in a bidding war to an investor.
Now, it’s harder to think of instances where that hasn’t happened.
“It’s very hard for regular home-buyers … to actually compete with the investors that are swinging in with their higher offers,” he said. “That’s just what time it is.”
From July through September, investors bought Tampa Bay homes at a record rate, according to data analyzed by Redfin that begins measuring in 2000. For those three months, one in four houses that sold had an investor as the buyer, for a raw total of nearly 5,000 properties.
Tampa Bay’s share of investor purchases was even higher than the record-breaking national average of 18 percent, ranking it as the seventh-hottest metro area for investors nationwide. No other state besides Florida had more than one city in the top 10. The Sunshine State had four — with Jacksonville at No. 4, Miami at No. 5 and Orlando ranking eighth.
That high concentration of investors has made things difficult for regular homebuyers using mortgages, who are easily outbid by companies paying all cash — at often more than the asking price. Some of the busiest activity is taking place in pockets of Tampa Bay that include the few remaining affordable options, pricing out long-time residents, many of them minorities.
Local renters trying to break into homeownership are harmed the most, said Sheharyar Bokhari, Redfin senior economist.
“Not only do they have to compete with other homebuyers coming from New York with a lot more money, but there’s also investors who have all cash,” he said. “For those folks this is really concerning.”
With around 20 percent growth in home prices in Tampa this past year, people are coming “out of the woodwork” to make quick money by doing flips, Bokhari said.
“Certain markets like Florida and the Sunbelt, they’ve seen a lot of people moving there in this past year, and those are areas where (investors are) most present.”
Investors started becoming bigger players in the real estate market after the housing crash that brought on the Great Recession.
But the recent spikes in home prices and rent rates plus the volatility of the stock market during the pandemic has made investing in residential real estate even more attractive, Bokhari said. Flipping and renting out homes are both lucrative propositions.
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Redfin defines “investors” as buyers with certain key words in their names, including “LLC,” “Trust” and “Corp.,” which aim to capture both large, institutional real estate investment corporations and mom-and-pop companies. Redfin compiled its data by combing through county property records.
Chris Lai, a Tampa Realtor with People’s Choice Realty, has noticed more investors. And they’ve recently begun behaving in new ways. For a time, those buyers would focus only on new construction. Now, they’re scooping up older homes, too, he said, and are generally interested in anything under $500,000. For these properties, investors are willing to exceed the asking price, he said.
“It’s not the old days,” Lai said. “They’re willing to go over the appraised value now. That used to never be the case but … they’re in this for the long haul.”
The high investor interest is good news for some, including property owners who are seeing their home values explode, said Michael Thompson, a Pinellas-based Realtor with Keller Williams.
“People that maybe bought their homes three to four years ago … are sitting on gold mines already,” he said. “That’s all being driven, in my opinion, by these hungry investors, cash-purchasers, first-time buyers.”
All the activity is another indicator of Tampa Bay’s meteoric rise in desirability for people flocking from around the country, Thompson said. Even as Tampa Bay’s prices have skyrocketed, they’re still relatively cheap for people coming from high-cost cities in New York and California, fueling the “boatloads of cash purchases,” he said.
Still, Thompson also represents a first-time buyer who’s been house-hunting on and off for nine months. His client recently got beat on a Clearwater home for which he’d offered $10,000 above the asking price. It closed for $70,000 more.
“It just all depends on what side of the fence you’re on,” Thompson said. For regular buyers, “it’s created this Wild West, chaotic sort of cowboy midtown shootout.”
Some Tampa Bay ZIP codes are particularly magnetic to investors, Redfin’s analysis found. St. Petersburg’s 33712, where Brown’s office is located in southern part of the city, ranked No. 1 with a whopping 37 percent of its third-quarter buys coming from investors. No. 2 was 33570 in Ruskin at 35 percent, and Ybor City’s 33605 ZIP code was in third with 34 percent.
All three of those ZIP codes have higher percentages of Black or Hispanic residents, and lower median household incomes, than the Tampa Bay average, census data shows.
Brown, a longtime St. Petersburg resident and Realtor, said he understands that less expensive homes in his area are good values. But the high concentration of purchases is also driving up costs for the many Black families who’ve lived there for years, many of them renters.
“This has been the ZIP code that has suffered the most, that just had all kinds of declines from really the ‘50s on. As African Americans moved into the neighborhoods, whites moved out and it was harder to get financing, property values went down,” he said.
Brown said he’s observed similar trends in other cities across the U.S., but it’s been “interesting” to watch it happen “right in front of you.”
“It used to be everybody was investing on the north side, until that was saturated and then they came to the south side,” he said. “Affordable housing be damned.”
Brown said today’s trends are almost the opposite of white flight.
“Sometimes, there’s a sense of urban removal because they wait until the property gets to its lowest and the lowest end of the (income) scale lives there,” he said. “All of a sudden the residents who were there are no longer there.”
Phillip Peters is an independent journalist, entrepreneur, digital marketer and press release publisher. He has a soft spot for technology, gadgets, cryptos and writing about health and politics. He also loves travelling the world! Phillip has been working with KukaUSA full time since September 2018.