"Artificial Intelligence, sophisticated software, massive databases, one-minute analyses, and automated cash offers in seconds - Houston home buyers and house investors don't stand a chance against this army of information," stated Raymond Campbell of HoustonHomeBuyers.net, "we are real estate professionals in danger of extinction. Some of us will survive on the fringes of the real estate market but I think this is an unstoppable force in residential real estate. And it is bad news for retail home buyers because they will have fewer homes to choose from."
If a residential property did not sell through a realtor and listed on the Multiple Listing Service (MLS) then it usually was a property in poor physical condition. Enter the real estate professional, house flipper, real estate wholesaler, or investor. They would buy the house, resell or repair it, and eventually, it would re-enter the housing stock after some (or many) repairs. That model is disappearing. The new model is "Big Data and Big Money" identifying the most promising houses in seconds, making offers in minutes, buying with cash, and keeping them as rentals. The professional Houston house buyers simply cannot compete.
The home-buying interest is focused on the standard 3 bedroom, 2 bath house in the $250,000 to $350,000 price range. However, a second market segment is a house priced under $200,000 which are entry-level homes and in high demand. Big Data is acquiring its data from major collectors of real estate data such as Zillow, Redfin, and the Houston Association of Realtors.
The Big Money home buyers are some of the largest hedge funds in the world. They use cash for their purchases because it eliminates many potential delays and roadblocks such as working with lending institutions. Cash purchases pay off liens and mortgages which streamlines the real estate transaction.
But professional home buyers in Houston are not the only ones feeling the squeeze. Retail home buyers are finding fewer and fewer options when they decide to buy. The big hedge funds have absorbed a significant amount of the supply - and usually the better houses. So Mr. and Mrs. Homeowner have fewer houses to choose from and usually, they are in poorer physical shape and less desirable neighborhoods. And to add a little more salt to the wound, this increase in institutional demand has and will continue to drive up home prices.
For better or worse, this is the new real estate market for investors and retail home buyers. Everyone will have to adapt. And that includes retail home buyers. Their choice of homes to buy will be smaller because the "big boys" have purchased the best properties in their target ranges. Those properties will become rental properties and be managed by large corporations and organizations. The American dream of homeownership is more difficult by the day.
