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American dream evolves for new generation, Mynd CEO says

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Doug Brien does not believe many young people have given up on the American dream of owning their own home, but their decision of when to buy is being influenced by other factors.

“I believe there is a sort of rethinking of the American dream happening right now,” Brien, the CEO of Mynd, told real estate journalist Jim Dalrymple onstage at Inman Connect in Las Vegas. “We are just seeing people delay that decision for a number of reasons.”

Among the reasons is the desire to be mobile, to go where the jobs are, according to Brien. The ability to rent homes from a company like Mynd, which has a large inventory of properties and offers professional management, is also attractive.

“People renting our homes find there’s actually a professional service and there are lots of choices,” he said. “They would say, ‘Wow, that’s really nice.’” 

Some of these renters in more expensive coastal cities are able to get a foothold in the housing market by purchasing a home remotely in one of the 25-plus markets where Mynd operates. Some 40 percent of the company’s 5,000 or so owners are remote investors.

Families need to compete with institutions

These days, families looking for homes to buy and investors in single-family rental (SFR) properties are often competing with large institutional investors. Some $45 billion poured into the sector last year, according to John Burns Real Estate Consulting.

Dalrymple said this has led to a lot of “disgruntlement” when the big corporations outbid regular buyers for homes.

“That is something that is here to stay,” Brien warned. “If you are a homeowner trying to compete with an institution, it’s like going to a gunfight with a knife.”

Enter power buyers — home buying services that guarantee a buyer's offer through a cash-backed offer — that can salvage a deal if a buyer’s financing falls through. 

Power buyers also support homebuyers by arming them with other services, like bridge financing and trade-in programs. 

“The power buying gives you that leverage to make an all-cash offer,” said Brien, “and gives you a chance of winning.” 

Low rates, lack of supply drive volatility

Another factor that has pushed many families out of the market was the extraordinary price jumps in the last three years, led by cities like Phoenix, Boise, and Tampa, which saw housing values jump by up to 70 percent in that period. 

Some markets have seen a cooling off since interest rates climbed above six percent earlier this year.

Part of the rise in home values over the last three years has been driven by “super low interest rates,” Brien said, “but the part of it that for some reason people talk about less, is just the supply problem.”

This is a problem that dates back to the housing meltdown back in 2009 and is unlikely to be resolved any time soon.

“I read that we are short between four and seven million homes,” he said. “I saw first-hand during the foreclosure crisis that the building of homes just literally stopped and we have never caught up.

“There is this disequilibrium that I think is causing prices to go up.”

Builders in some parts of the country slowed their pace as many potential buyers were priced out of the market by higher rates. Prices have moderated, and even started to drop, in some of what were the hottest housing markets in the country.

“Most of the agents have felt a shift in the market,” said Devyn Gillespie, senior sales director at Mynd, who attended the Inman conference. “Some people were not in tune with how quickly things were turning,” Gillespie said.

Largely catering to agents, Inman is one of the real estate industry’s leading annual events, held this year in Las Vegas from Aug. 3-5.

Brien does not see anything on the horizon that resembles the crash in 2009. Back then, there was nobody buying homes, and entrepreneurs like himself stepped in, giving birth of the SFR industry as an asset class. 

He compares the evolution of SFR to what happened to multifamily properties in the wake of the savings and loan crisis, a slowly developing disaster where nearly a third of the 3,234 savings and loan associations in the United States failed between 1986 and 1995. 

Before that, most multifamily properties were owned by mom-and-pop operators, much like SFR today. After it was all over, the institutions had moved in, and today some 55 percent of multifamily real estate is owned by large operators.

‘Wall of capital’ transforms the market

Today, only about four percent of SFR properties are owned by institutions, a figure that Brien thinks will rise to around 15-20 percent over the next decade or so. The average SFR investor owns just one or two homes. 

“When the institutions come in, they do not back out,” he said. “Now you have this wall of capital that will always be there if prices were ever to drop precipitously.”

Gillespie said that agents who educate themselves will be able to meet the shift in the market. 

“That wall of capital is not going away,” he said. “You can either lose out on the opportunity or prepare yourself to stay relevant.”

Brien recommends agents make a commitment.

It’s the difference, he said, between “I do investments” and “I focus on investments.”

For agents who want to be a part of the shift in the market for single-family homes, Brien advises “really going deep, buying properties yourself. The ones that the institutions are more likely to work with are the ones who go all in.”

Uncertainty reigns, but could be short-lived

The uncertainty in the housing market cast by the twin shadows of higher interest rates and inflation pushing past nine percent is just another bump in the road for longtime real estate professionals.

Gillespie has witnessed a dramatic slowdown in buying in Phoenix, where he is based, along with bulging inventory and price reductions.

He doesn’t think it will last.

“What’s happening right now will be very temporary,” Gillespie said. “It’s a perfect storm of run up in pricing, inflation, and mortgage rates.”

Brien acknowledged that the real estate market has entered an unpredictable phase, but believes there are macroeconomic factors at play.

“I think this is a tricky time in the market and a lot of us are feeling angst over it,” he said, adding that he subscribes to this assessment:

“We don’t have a real estate problem, we have a capital markets problem.”

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