Note: the following article originally appeared in the Memphis Business Journal on September 17, 2021.
Equity harvested from hot housing market, now where to go?
Memphis Business Journal | John Klyce
Though there are some signs it could be slowing, the housing market remains strong, and many are taking advantage of opportunities. This period has been ideal for sellers but arduous for buyers.
In August, the local average home sales price was up from $221,954 to $254,420 year-over-year, according to the Memphis Area Association of Realtors (MAAR). And local Crye-Leike agent Mary Driver Smith recently told MBJ she’s had clients sell their house in one day, often at prices $60,000 to $70,000 above what they asked for.
Yet, there’s a caveat that can come with these sales: After shedding themselves of their homes at handsome rates, some have encountered twists of fate as they’re thrust onto the buyer’s side of the seller’s market they just profited from.
“You sell your house, and you make a lot of money on your house,” Driver Smith said. “The problem is, where are you going?”
While some sellers have their next living situations arranged, not all do, and finding alternatives can be challenging. Housing inventory is recovering — the number of available homes in August topped 2,600 — but it’s still well behind its September 2019 position, when there were about 4,200 homes available. And these days, buyers must also compete for homes with institutional buyers — which are often paying in cash and above the asking price.
In the second quarter of 2021, 15.8% of homes sold in Memphis went to institutional buyers, according to property database Attom Data Solutions LLC. That’s the largest percentage of any metro area in the country, and an increase from the 13% seen during Q1 2021 and 5.2% posted in Q2 2020.
Driver Smith has seen this trend firsthand.
“Investors are snapping up houses … at every price range,” she said.
Apartment rentals aren’t always readily available as temporary solutions for sellers, either; Driver Smith said many buildings are full.
Options in the current housing market do exist, though some are atypical.
For example, some home sellers over the age of 55 are turning to retirement communities as temporary relief.
New approach: The complexes made by Avenida Partners are for people entering the “stage of life where it’s about having fun,” said Robert May, the founder and managing partner of Avenida.
The California-based firm has 11 retirement communities throughout the U.S., including the 161-unit Avenida Watermarq at Germantown, which opened in November 2020.
“We started the company about 10 years ago with the specific purpose of addressing a modern housing style for this baby boomer generation coming through in big numbers,” May said.
Separating Avenida from similar places is its distance from the traditional medical model found in many retirement homes, May said.
Avenida instead seeks to focus on wellness and lifestyle, and it offers independent living apartments for active adults 55 and up — though May said the average age nationally is 76.
Avenida has an array of activities for residents, from yoga to art classes, and is, in some ways, May said, like a “boutique residential club.”
Overall, Avenida enjoys an 85% retention rate, speaking to its viability for those looking for a permanent place to live. But, it also presents a potential temporary solution for eligible residents, as it offers one- and two-year leases.
Driver Smith said she has referred a client there, and the complex has seen heavier interest in recent months.
While this is also due to shifts from the COVID environment, May believes the current housing market has played a role. He said there are people who aren’t sure exactly where they want to live but want to “wait out the storm of the housing frenzy.”
Currently, the Germantown location is 45% occupied — it has 67 occupants — and has seen “excellent traffic” in recent months.
Nationally, over the past four months, Avenida has written about 33% more leases.
“It’s just starting to be where the senior who isn’t sure where they want to live but wants to harvest equity … is saying, ‘Let’s go to Avenida to see [how it is],’” May said. “That’s an interesting phenomenon happening right now.”