EDITORIAL: The cost of selling homes for cash

Ask your friends in real estate about the current market and they will shake their heads slowly and tell you they have never seen anything like it: Inventory is low; demand is high; the cost of building materials is up more than 20 percent from pre-pandemic prices; interest rates for mortgages are almost twice what they were in 2019.

They will also tell you that most of the homes listed under $200,000 are getting snapped up by cash buyers which are usually corporations looking to rent these homes once they get them under contract.

It happens like this: When properties are scarce, every home that’s put on the market quickly gets multiple offers; homes below that $200,000 price point are usually sold within a matter of days. But corporations pay cash, as opposed to humans who generally have to get pre-qualified for a loan to even be in the game. But corporations can easily pay above asking price, while a borrower cannot raise more funds than they qualify for. That’s just one advantage corporations have over actual people.

According to a study by the Washington Post, in Greensboro and Winston-Salem  between 30 to 60 percent of homes sold in Greensboro and Winston-Salem went to cash buyers in 2022. Not coincidentally, rents for one-bedroom apartments in Greensboro rose by almost 75 percent in 2022, averaging $1,289 per month in July 2022; Winston-Salem rents rose 22 percent, to an average of $1,293 per month.

It’s happening all over the country, but the Triad has been particularly wounded by corporate homebuyers who are speculating on housing, which many consider a human right. Beyond that, homeownership has long been a reliable way for American families to begin building wealth.

Homeownership has always been more affordable in Guilford and Forsyth counties than in the other populous counties of the state. But even as home values have roughly doubled since 2020, corporate buyers remain unfazed because, unlike prospective local homeowners, their fortunes are not dictated by the Triad economy, which still lags behind the rest of the country.

So affordable homes get snapped up for cash, well above market value, which drives up the prices of other single-family homes in these neighborhoods and also sets a rent rate well above what people had been paying even a couple years ago. Rent for a one-bedroom in Guilford or Forsyth is now considerably more than a monthly mortgage note would be. And so the thwarted first-time buyers get stung again.

It’s a crisis that could be prevented by legislation — cities, counties and even neighborhood associations have some control over who gets to buy houses inside their jurisdictions just as they have some control over short-term rentals and other property issues. Atlanta is already considering moves to restrict corporate homeownership, as are Dallas and Los Angeles. Canada has already banned the sale of property to non-Canadians for a two-year term.

“Homes are for people, not investors,” Prime Minister Justin Trudeau said in January. The same holds true here.