Growing Real Estate 'iBuyer' Companies Raise Concerns

The troubling trend of buying and selling homes as an investment has some critics worried that it will contribute to an already overheated housing market.

2 minute read

November 2, 2021, 8:00 AM PDT

By Diana Ionescu @aworkoffiction

Suburban Home

Pexels / Pixabay

Jerusalem Demsas reports on "a growing fear that housing is becoming less like shelter and more like a risky financial asset traded on Wall Street." A trend dubbed 'iBuying' is being blamed for manipulating the housing market, which already saw major upheavals and a "historic undersupply" during the pandemic, writes Demsas.

Zillow began flipping homes in 2018, hoping its algorithm-based approach would be a profitable way to buy and sell homes. Now, writes Demsas, it has announced that "it would stop buying homes for the rest of the year, self-reportedly due to a 'backlog of renovations and operational capacity constraints' that it blamed on the supply chain issues plaguing the economy."

Demsas writes that while concerns that these companies will drive up home prices might be unfounded, the rise of institutional real estate investors could have an impact on regular buyers and renters. 

iBuyer companies make up a very small share of the market — roughly 1 percent of home sales in the second quarter of 2021, at what is their peak so far — but it’s important to take concerns about their growth seriously. While iBuyers contend that they are offering a clear solution to reducing the stress of the home-selling process, US policy has predicated financial security on homeownership, and the introduction of large firms into the space raises fears of potential anti-competitive and predatory behavior.

Planetizen has previously covered the wild ride of the housing market during the pandemic as prices skyrocketed and low- and middle-income households are increasingly pushed out of most major cities. 

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