A June 19th article in the Wall Street Journal depicts an interesting change in the Arizona housing market that may disrupt the entire housing industry. For better or worse, this change is giving the upper hand to large investors with access to high computing power. But it may benefit the individual home buyer and home seller too. It’s still in its early stages, but big companies like Opendoor and Zillow Group, Inc. are buying Phoenix real estate and flipping homes for a quick resale. These sales may be with individuals, but they are often sold to big landlords who control a large amount of rentals in the area.

            How do they do it? Using complex computer algorithms that notify the big investors immediately when a house comes on the market that looks like a good investment. Using these algorithms, the company knows how much to offer based on how much they can profit by its resale and how long it is expected to be on the market. It’s reliable to a certain extent, but it isn’t without risk. The large investment companies focus on high volumes of sales because they aren’t making huge gains on each transaction. However, they are able to create a very large volume, so it is lucrative. According to the Wall Street article, these house flipper companies have bought thousands of homes in the area, and more than 22,000 rentals are now owned by big investors.

            It seems a little too corporate, but there are advantages to this non-hostile takeover of the housing market by corporate America. A person selling their residence may get a higher offer from these investment companies if the computer dictates that it is worth the higher price tag in order to warrant the sale. Also, these algorithms are bringing technology to the real estate process. In some cases, using an app can get you electronic access to viewing homes instead of relying on the schedules of homeowners and real estate agents.

            It is too early to tell how big investment companies are going to impact the housing industry, and if home prices fall, it would put a quick end to this money-making trend. However, right now these companies are modernizing the housing market, and there are some real benefits for both parties involved in a home purchase. However, the large investment companies owning so many rentals and controlling so much of the housing market is a bit ominous. It renders many people who have to get mortgages to buy a home powerless in the face of these large companies with cash buying power.