Date the rate. Marry the house.
Now, what does that mean? That means that if we went back in time to a year ago, the market was a completely different animal. Right?
A year ago, buyers that were in the marketplace were experiencing multiple offers on every listing. They were being asked to sign escalation clauses that would maybe sometimes mean they were paying 10, 20, 30, 40, 50, a hundred thousand dollars more than the list price. People are being asked to do appraisal waivers, inspection waivers, appraisal gap language, non-refundable earnest money.
It was an incredible time to be a buyer in what we might call a frenzy market.
Now, fast forward to today:
The market's undergoing a complete shift, right? And what that means is there's a lot more to choose from. There's a lot more listings on the market. List prices are coming down in a lot of price categories. We're seeing a lot fewer buyers in the market. So that means that the...
The Wall Street Journal just put out an interesting article about a company called Invesco putting $5 billion into a hedge fund that's purchasing single family homes.
And they're not alone. There's another $6.5 billion dollars targeted with other hedge funds doing exactly the same thing.
Now, why are these hedge funds going after single family homes?
Well, they've identified that they can get a cap rate of as much as 6.8%. That's the target rate that they're comparing to apartment buildings and commercial — which is like the low sixes.
So what they're saying is: we're going to make money on this. And we're going to rent these houses to millennials that are choosing not to become homeowners.
What we need to do as an industry, number one is to recognize that we should be investing in single family homes as well. But also we need to encourage everybody that's not a homeowner today to get into the real estate arena and buy their...
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