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Homebuilders are selling en masse to minimize inventory

With mortgage rates rising, the housing market has slowed significantly in recent months, and now homebuilders across the country are faced with the problem of too many homes and too few buyers.

Jessie Casson | Getty Images

In efforts to reduce excess inventory, builders have begun offering bulk sales to investors, The Wall Street Journal reported.

Bruce McNeilage, co-founder of investment firm Kinloch Partners, told the outlet he has received offers from homebuilders to buy thousands of finished homes at discounts of up to 20% off what they would charge individual buyers.

Related: The Housing Market Cools Down Fastest in These 10 Cities

“We’re getting cold calls from builders we don’t even know,” McNeilage said The Wall Street Journal. “They’re saying, ‘Nobody qualifies for funding. We’re going to get wind of this. Let’s get in touch with investors and see if they want a whole subdivision.'”

The urgency comes as more buyers pull out of their contracts and the housing market cools across the country. September was the worst month for new home buyers since 2012, according to the NAHB/Wells Fargo housing market index.

However, the market for viable investors to buy homes — even in bulk at a discount — can also be small. According to Rick Palacios, a researcher at John Burns Real Estate Consulting LLC, only 2% of total investor home purchases in July were new homes. In 2020, that number was around 6%.

Still, the ability to buy homes in bulk is an attractive proposition for some investors, especially those hoping that prices will just keep falling.

Related: Jerome Powell Says Housing Market ‘Reset’ Is Already Underway

“The scarier things get, the more appealing this gets,” Adam Stern, founder of single-family rental brokerage Strata told SFR. The Wall Street Journal.

However, reducing inventory by selling in bulk to investors reduces the inventory of homes available to traditional potential buyers. Still, the transactions with investors can protect current homeowners by preventing prices from falling more than they otherwise would.

Shreya has been with australiabusinessblog.com for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider australiabusinessblog.com, Shreya seeks to understand an audience before creating memorable, persuasive copy.

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