The out of office responder is on. I am currently on a multi-day stopover in Lisbon on my way to Malaga, Spain. One of my oldest friends (we went to elementary school together in Toronto) is getting married there this weekend. They chose Spain because that's where they met (she is Parisian). They have an incredible love story and I'm looking forward to celebrating with them in a few days. The above photo was taken with my iPhone from Sky Bar. The green you see in the foreground is Av da Liberdade. Here is another photo from a different angle, where you can begin to see the water (Tagus). Its tree canopy is one of the most impressive that I have ever seen. Its grandeur (largely its width) is quite a contrast against the small and winding streets in the rest of Lisbon. And it may be one of the only level places in this exceptionally hilly town. I'm a big fan of Lisbon, already.
We are in West Virginia now, where the only kind of housing that we have come across is -- not surprisingly -- low-density, detached, and single-family. Indeed, approximately 75% of the residential land across the entire US is estimated to be zoned for detached single-family homes. Using data from UrbanFootprint, the NY Times recently published a series of city maps outlining the percentage of land dedicated exclusively to this housing type.
I have been writing about algorithmic home buying on the blog since Opendoor launched back in 2014.
I don't have anything new to report on that today, but this recent article from the WSJ is interesting in that it talks about why Phoenix, in particular, has become ground zero for algorithmic home buying, as well as for institutional investors looking to buy cheap rentals.
Across Opendoor, Offerpad, and Zillow, nearly 500 homes are now being purchased -- largely by software -- in Phoenix each month:
In some cases, such as on residential corner lots in Portland, duplexes are allowed. But generally speaking, the pink corresponds to detached single-family housing. About 15% of residential land in New York City is zoned for this, compared to about 94% of the land in San Jose. Interestingly enough, none of the residential land in Manhattan is zoned to accommodate detached single-family housing.
One of the reasons why Phoenix is well suited to these platforms is that the housing stock is cheap and fairly homogenous. (The WSJ calls it "stucco sprawl.") This makes it easier for the algorithms to put a value on the homes.
A big chunk of the housing stock is also relatively new. Just over 36% of it was built in 2000 or later. And it tends to trade fairly often. Below is the percentage of homes in 2018 that were resold within a year of purchase.
It's also worth noting that Arizona is a non-recourse state, meaning you're typically not personally liable if you default on your home mortgage. You simply hand back the keys. So it's viewed as a fairly risk tolerant state, which may be one of the reasons why Phoenix's median home price chart looks like this:
I'll end with this quote from the article: “It’s the dawn of e-commerce for real estate,” said Zillow Chief Executive Rich Barton. “Phoenix is ground zero.”
Charts: WSJ
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