Wall Street scooped up a third of Texas single family homes sold last year (2022)(therealdeal.com)
therealdeal.com
Wall Street scooped up a third of Texas single family homes sold last year (2022)
https://therealdeal.com/texas/2022/06/14/wall-street-scooped-up-almost-a-third-of-all-texas-single-family-homes-sold-last-year/
185 comments
The corporate mega landlords will own a large chunk of all housing in the future, and never release it back to the market.
According to the source data for the article:
42% OF SINGLE-FAMILY PROPERTIES PURCHASED BY INVESTORS WERE CONVERTED TO RENTALS
45% WERE SOLD BACK (flipped)
So they are in mostly back on the market.
This is where the data from the article is from:
https://cdn.nar.realtor/sites/default/files/documents/2022-i...
According to the source data for the article:
42% OF SINGLE-FAMILY PROPERTIES PURCHASED BY INVESTORS WERE CONVERTED TO RENTALS
45% WERE SOLD BACK (flipped)
So they are in mostly back on the market.
This is where the data from the article is from:
https://cdn.nar.realtor/sites/default/files/documents/2022-i...
In one iteration, 42% are converted to rentals and 45% were "sold back" -- but to whom were they sold back? If they were sold to other investors, they go through another 42% reduction. And so on, for however many iterations there are until it ends up in the hands of someone who actually wants to live there.
> It's coming to Australia too
Is here. Was having an ethics chat with a friend involved with one group and their main point is this makes it better for renters as corp owners give long term stability for a 'home' vs private investors who turnover property.
That was the only point that resonated to me but overall I see this as a real loss for society to take away home ownership from people, or make it so difficult. There something in most peoples core that wants to own their home.
Given the pain points it's inflicting on so many people it's amazing how little political reform there has been other than the first home buyers grant, which was really more about economic stimulation that helping property ownership.
Is here. Was having an ethics chat with a friend involved with one group and their main point is this makes it better for renters as corp owners give long term stability for a 'home' vs private investors who turnover property.
That was the only point that resonated to me but overall I see this as a real loss for society to take away home ownership from people, or make it so difficult. There something in most peoples core that wants to own their home.
Given the pain points it's inflicting on so many people it's amazing how little political reform there has been other than the first home buyers grant, which was really more about economic stimulation that helping property ownership.
It should really be called small-parcel-of-land-plus-a-residential-structure borrowership-with-eventual-ownership.
And it is not all upside. Changing from one "owned" "home" to another has high transaction costs compared to renting. This has all kind bad consequences: people wind up living in the wrong shape/size of house for their family size. It makes it expensive to move to follow economic opportunity.
And then there is all the downside from having such a large portion of your savings tied up in a single, often highly leveraged, asset. Nobody would let you lever up your retirement portfolio 20:1 on any other kind of asset. And home ownership turns otherwise reasonable adults into NIMBYs.
As for the demise of home ownership, the last few decades have seen it fluctuate in a relatively narrow band. See these charts: https://dqydj.com/historical-homeownership-rate-united-state... https://en.wikipedia.org/wiki/Home-ownership_in_the_United_S...
And it is not all upside. Changing from one "owned" "home" to another has high transaction costs compared to renting. This has all kind bad consequences: people wind up living in the wrong shape/size of house for their family size. It makes it expensive to move to follow economic opportunity.
And then there is all the downside from having such a large portion of your savings tied up in a single, often highly leveraged, asset. Nobody would let you lever up your retirement portfolio 20:1 on any other kind of asset. And home ownership turns otherwise reasonable adults into NIMBYs.
As for the demise of home ownership, the last few decades have seen it fluctuate in a relatively narrow band. See these charts: https://dqydj.com/historical-homeownership-rate-united-state... https://en.wikipedia.org/wiki/Home-ownership_in_the_United_S...
Look what happened to Berlin over the past 20 years. Same thing: skyrocketing rents.
> take away home ownership from people
The home ownership still belong to the people. It's just that some people are more people than others
The home ownership still belong to the people. It's just that some people are more people than others
>this makes it better for renters as corp owners give long term stability for a 'home'
I can't take this seriously. Given who writes the rules the end result will always be "better long term stability for whoever can afford it" - if the corporate owner things they can get more money then they'll kick out the current renter by raising prices again - like they're doing with the private market now.
I can't take this seriously. Given who writes the rules the end result will always be "better long term stability for whoever can afford it" - if the corporate owner things they can get more money then they'll kick out the current renter by raising prices again - like they're doing with the private market now.
We can make more houses
Corporations will own everything in city's, but don't worry, you can buy a house in the middle of nowhere! Oh, and those corporations are heavily against work from home, by chance.
All US cities are far below the size they would be with building up.
And the "investors" can buy them all up. Look at Vancouver Canada. They built and built and the investors bought and bought. Prices continued to climb.
And if corporations own the land?
You can always escape to the Metaverse™ to build in Minecraft™ for the low price of 9.99!
And don't forget Bill Gates buying up loads of farmland.
I assume this was said sarcastically because of the wider conspiracy stuff, but I do think this is a problem.
Overconcentration of ownership doesn't benefit society. Not only the extremes of monopolies or oligopolies, but generally shifting away from a single person being able to own and run a business. It feels we are regressing from last centuries significant gains here. Its particularly bad in downstream areas like abattoirs where 4 companies control most of the industry.
Bill Gates might only own 300,000 odd acres now, which is huge but hardly taking over the industry, but its growing and the historical norm is for this to concentrate over time and something we should actively avoid so we dont end up like Scotland or other places where a handful own the majority, which I think will happen if its not actively worked against.
Overconcentration of ownership doesn't benefit society. Not only the extremes of monopolies or oligopolies, but generally shifting away from a single person being able to own and run a business. It feels we are regressing from last centuries significant gains here. Its particularly bad in downstream areas like abattoirs where 4 companies control most of the industry.
Bill Gates might only own 300,000 odd acres now, which is huge but hardly taking over the industry, but its growing and the historical norm is for this to concentrate over time and something we should actively avoid so we dont end up like Scotland or other places where a handful own the majority, which I think will happen if its not actively worked against.
You can still build it in your mind, probably.
If the people of the left and the right could set their banker fueled squabbles aside for a while, they could affect laws to, e.g., massively tax institutional home ownership, so it drives them out of the market and brings prices down, and massively tax anything over two homes and anything over a certain square footage per person, etc. all to drive the prices down. Or did that matter, simply not letting that bankers flood the country with foreign nationals that will drive prices ever higher and stoke inflation.
The great red herring which divides ordinary people on the left and right has always been the "culture wars" - particularly political correctness/DEI/wokeness/whatever the flavor is depending on your decade and ideological leaning.
Elite Democrats, Republicans and members of the capital class are very experienced at fanning the flames of that divide so it continues to distract the working class from a historic multi-decade privatization and consolidation of wealth which these real estate acquisitions are just the next leg of.
America has fallen for that trick hook, line and sinker quite frankly, more so than seemingly any other country on earth
Elite Democrats, Republicans and members of the capital class are very experienced at fanning the flames of that divide so it continues to distract the working class from a historic multi-decade privatization and consolidation of wealth which these real estate acquisitions are just the next leg of.
America has fallen for that trick hook, line and sinker quite frankly, more so than seemingly any other country on earth
Having been the target of the right's culture wars, I can assure you it certainly does not feel like a "trick" to me and the idea that writing me off as a lost cause will magically fix all of America's problems is frankly disgusting. This reads as little more than a rationalization of bigotry.
Thanks for calling me a bigot, you're definitely elevating the discussion /s
The point isn't that there are no culture war issues that matter - for example I'm pro choice and pretty disturbed by recent right wing activity on that front
It's that the culture war is basically unwinnable and if people fixate on that to the exclusion of economic issues, everyone but Blackrock and Goldman Sachs will end up owning nothing.
Blackrock is laughing its way to the bank every time you start a flame war with some imaginary bigot. Classical Marxists, classical liberals, hell classical conservatives have actually been making this point for years and they've all been called bigots for it
The point isn't that there are no culture war issues that matter - for example I'm pro choice and pretty disturbed by recent right wing activity on that front
It's that the culture war is basically unwinnable and if people fixate on that to the exclusion of economic issues, everyone but Blackrock and Goldman Sachs will end up owning nothing.
Blackrock is laughing its way to the bank every time you start a flame war with some imaginary bigot. Classical Marxists, classical liberals, hell classical conservatives have actually been making this point for years and they've all been called bigots for it
> Thanks for calling me a bigot, you're definitely elevating the discussion /s
If you start a conversation by encouraging people to view my basic civil liberties as a "trick," there is no hope of elevating it. I won't bother dignifying you by responding further.
If you start a conversation by encouraging people to view my basic civil liberties as a "trick," there is no hope of elevating it. I won't bother dignifying you by responding further.
I would say the trick here is the convincing of the other tribe to see your civil liberties as something to attack. OP has a valid point, but completely undermined it by only describing the blue team's culture war dogma, while leaving out that of the red team (eg religious fundamentalism).
If things continue as they are with the Elites owning everything you won't have any civil liberties. And I think that's part of the person's point.
Just look at what's happening in the UK, they've basically outlawed the right to publicly protest.
The difference between Occupy Wall Street to Rainbow Capitalism was pretty striking. Same demographics, very different reaction to the capital class meddling in.
>If the people of the left and the right could set their banker fueled squabbles aside for a while
I’m astonished that you’d think the impediment to your proposals would be the left.
Centrism discourse has run amok.
I’m astonished that you’d think the impediment to your proposals would be the left.
Centrism discourse has run amok.
Unfortunately, most of the more politically organised or influential people like things that make property work as an investment. This means they fire up and defeat measures against it. I can't see a way out in Australia.
The right who like house prices going up and hate taxes would just have to have a temporary complete change of heart and direction
Should not default to a defeatist attitude like this. Governments will do something if enough citizens complain and not a minute before.
*if the right citizens complain and in the right ways
Like abortion?
Housing can't be both affordable and an investment, and people voted for "investment."
Land value tax would solve this.
And if most people end up renters, they've killed their middle-class allies against a robust LVT among home owners.
And if most people end up renters, they've killed their middle-class allies against a robust LVT among home owners.
It is the new subscription economy. You will own nothing and be happy.
I mean, at some point, people will be so broke there won't be anything left to take, so there's that.
>Treasurer Jim Chalmers has met with...
Can I get a source on that? As an Australian this affects me.
Can I get a source on that? As an Australian this affects me.
Here you go.....
https://ministers.treasury.gov.au/ministers/jim-chalmers-202...
"addressing barriers to investment within the housing sector;"
Read the list of attendees.
https://ministers.treasury.gov.au/ministers/jim-chalmers-202...
"addressing barriers to investment within the housing sector;"
Read the list of attendees.
This is a misinterpretation, IMHO.
You are assuming from the attendee list that this is about these banks and super funds outright owning the housing asset whereas a more reasonable interpretation is about those organisations funding construction and financing of the assets for private ownership.
You are assuming from the attendee list that this is about these banks and super funds outright owning the housing asset whereas a more reasonable interpretation is about those organisations funding construction and financing of the assets for private ownership.
You choose to make the most charitable interpretation in favor of the government.
Agreed. It's almost impossible to REALISTICALLY interpret "addressing barriers to investment within the housing sector" in any way that would benefit the working class. What is this "round table" going to propose? That the banks all put in money to build a bunch of houses and then give them away for free?
> That the banks all put in money to build a bunch of houses and then give them away for free?
Housing supply is a massive issue in Australia. This takes investment from developers to buy bulk land, subdivide, permit, build and then sell to families. Mom and pop don't do this...developers do. We need more of it and this is what the government is trying to help.
The government is trying to "grease the wheels" of this process by supporting investment to create more housing supply. I don't particularly support the current federal government but assuming they are plotting a corporate takeover is misguided.
Housing supply is a massive issue in Australia. This takes investment from developers to buy bulk land, subdivide, permit, build and then sell to families. Mom and pop don't do this...developers do. We need more of it and this is what the government is trying to help.
The government is trying to "grease the wheels" of this process by supporting investment to create more housing supply. I don't particularly support the current federal government but assuming they are plotting a corporate takeover is misguided.
Housing supply is kept artificially low; this a generally-accepted fact.
"Assuming they are plotting a corporate takeover" is hardly misguided. It's an already-well-trod and completely-legal path for banks and developers to take, and they stand to make money hand over fist for it. And if you're saying that no-one in government would support them in this then I have a bridge to sell you.
If anything, assuming they wouldn't do it is misguided.
"Assuming they are plotting a corporate takeover" is hardly misguided. It's an already-well-trod and completely-legal path for banks and developers to take, and they stand to make money hand over fist for it. And if you're saying that no-one in government would support them in this then I have a bridge to sell you.
If anything, assuming they wouldn't do it is misguided.
"There is a massive opportunity in promoting greater investment in sectors that deliver both strong returns for investors and strong returns for our community."
While there is balance, overall it's more; investors or community, choose one.
While there is balance, overall it's more; investors or community, choose one.
It's mildly amusing that this is happening basically as a consequence of capitalism and yet there is no shortage of Americans mocking the "slavish" Europeans that live in rent societies. Seems like the US is also turning into a rent society, only the landlords are much less regulated corporations as opposed to very strictly regulated parts of government.
Developers will still build new homes that won’t be owned by these companies.
Land is not fungible ("location, location, location," as real estate agents often say) and good land is often constrained by zoning and other local regulations. Being able to buy a lot in the middle of nowhere with no access to jobs or other basic necessities is not terribly useful unless you are already independently wealthy. A truly widescale and permanent adoption of WFH might move the needle on this sort of thing, but (checks WSJ) gosh, whaddya know, it turns out Wall Street is fighting tooth and nail against WFH adoption.
I work on a lot of condo towers as a high rise window cleaner. I'm seeing new builds get picked up by institutional investors all the time.
There was this story a while back where builders couldn’t find buyers so they sold to Blackrock at a 20% discount so they could get out.
High interest rate policy isn’t fighting inflation it’s just transferring wealth upwards even more.
High interest rate policy isn’t fighting inflation it’s just transferring wealth upwards even more.
I would like to know more about being a high rise window cleaner.
Maybe, for that first sale. Then, a housing bubble bursts, those first sales get foreclosed, and the bankers get the houses anyways.
Where I live, they're building mostly *apartments*, not *condos* and not *houses*.
I get that people like blaming Wall St. for prices going up, but isn’t it just as much the other way around?
Wall St. invests in homes for the same reason they invest in anything: because they think the price will go up. Housing policy in the US seems designed around the idea that housing prices should only go up, since it’s the largest asset of the majority of voters.
If we want to fix the housing crisis, housing will have to become a bad investment, and that will fix the Wall St. problem too.
Wall St. invests in homes for the same reason they invest in anything: because they think the price will go up. Housing policy in the US seems designed around the idea that housing prices should only go up, since it’s the largest asset of the majority of voters.
If we want to fix the housing crisis, housing will have to become a bad investment, and that will fix the Wall St. problem too.
I think this argument ignores Wall Street's outsized influence on government policy; look at the 2008 recession, in which Wall Street's bad bet on a real estate bubble got bailed out while the actual home owners were thrown out onto the street and financially ruined. The government may not explicitly protect home prices, but it does protect Wall Street from its own risky behavior, which inexorably turns any drop in home prices into an opportunity for Wall Street to "buy the dip" while regular citizens struggle to keep a roof over their head.
> The government may not explicitly protect home prices,
It absolutely does by offering 30 year fixed rate loans with no prepayment penalty and all the underwriting waivers for people to be able to pay more than they can afford, such as no money down and 5% down mortgages.
It absolutely does by offering 30 year fixed rate loans with no prepayment penalty and all the underwriting waivers for people to be able to pay more than they can afford, such as no money down and 5% down mortgages.
And despite all that, home prices did, in fact, go down during the 2008 recession. And while the government does -- as you point out -- establish policy that biases the market in favor of home prices increasing, the government does not protect home prices the way it protects Wall Street from bad investments.
“Wall Street” investments go down in price too (in real and nominal terms). Many businesses fail and cause equity owners to lose money.
Just like home (land) prices in certain parts of the country.
But the prices in the overall market, just like “Wall Street” is backed (and juiced) by the federal government.
Just like home (land) prices in certain parts of the country.
But the prices in the overall market, just like “Wall Street” is backed (and juiced) by the federal government.
Wall Street's influence pales in comparison to the influence of the American homeowner.
What we have is the result of decades of making owning a home the main way to accrue wealth and then giving homeowners outsized power.
Wall Street is just following the money.
What we have is the result of decades of making owning a home the main way to accrue wealth and then giving homeowners outsized power.
Wall Street is just following the money.
And yet homeowners got fucked and Wall Street got bailed out. Where was the mythical homeowners' political power when prices were plummeting (in my neck of the woods by 30-50%) and they were threatened with the possibility of foreclosure on an upside-down mortgage?
You're only threatened with foreclosure should you fail to pay your mortgage. Your mortgage being upside-down has nothing to do with it.
Having said that, the major banks shouldn't have got bailed-out either. Smaller banks that were responsible would have had the opportunity to grow when the larger banks faltered due to their bad decisions.
As another commenter here quipped, the first houses Wall Street bought were in Congress.
Having said that, the major banks shouldn't have got bailed-out either. Smaller banks that were responsible would have had the opportunity to grow when the larger banks faltered due to their bad decisions.
As another commenter here quipped, the first houses Wall Street bought were in Congress.
[deleted]
Perhaps we could say what the goldbugs have been saying for years: it's the money that's the problem.
Oh for sure, the gov is willfully looking the other way on this one. Increasing home prices drives up tax revenues.
Politicians don't give a flying fuck at a rolling donut about tax revenues, see also several decades worth of tax cuts. What they do care about is access to the finance they need to campaign effectively.
Those tax cuts are different from the local taxes on property though. The tax cuts you're referring to are federal taxes. Property taxes are local to the state, and those tend to always go up and let the homeowners do their annual protest to those increases. In recent years, the local taxes have increase in increments larger than the state allows, but yet "oops" was the typical response if you got anything at all.
Absolutely correct.
The best way to fix the problem is to keep interest rates high and work against inflation.
The last 25 years of essentially free money has people with their heads screwed on backwards.
The best way to fix the problem is to keep interest rates high and work against inflation.
The last 25 years of essentially free money has people with their heads screwed on backwards.
Increasing mortgage rates is a poor mechanism for countering inflation. It only directly impacts a minority of the economy and private companies (banks) earn the profit.
Unfortunately the other available lever is congressional action in the form of tax increases and wildly increased public housing funding. Both of which are never going to happen.
Isn't housing a bad investment already? I mean at least for individuals renting has always been pushed as a better alternative.
Careful. My house has been appreciating at $50K per year over the past 10 years. That's over $4K per month. I'm essentially being paid to live in my house. Obviously, there are a lot of caveats. I bought my house in 2009 when the housing market hit bottom due to the crash, the seller just wanted to get out and sold it below market value - even the market at that time!
Everyone said it was a bad time to buy a house.
It was a great time to buy a house! You know when it's generally a bad time to buy a house? When everybody is buying a house! It's like the stock market. When the market crashes those are the best times to pick up stocks on the cheap. Same with houses. That's how you make money.
Everyone said it was a bad time to buy a house.
It was a great time to buy a house! You know when it's generally a bad time to buy a house? When everybody is buying a house! It's like the stock market. When the market crashes those are the best times to pick up stocks on the cheap. Same with houses. That's how you make money.
Or it could be regulated too.
Regulations can only do so much here. By definition, you can either make housing affordable to young people entering the market, or make housing a path to wealth appreciation for homeowners. They are diametrically opposed goals, despite that most politicians will be happy to tell you we can have both.
I see what you're saying. What I mean is right now, I think regulation is the only thing that is capable of making homes a bad investment, which would allow young people to own a home over their heads. The types of regulations are very debatable. All I know is doing nothing will continue this death spiral where the wealthiest individuals/corporations will continue to gobble everything up for every generation.
> By definition, you can either make housing affordable to young people entering the market, or make housing a path to wealth appreciation for homeowners
By whose definition? Certainly the massive suburban expansion in the 60's and 70's resulted in affordable homes to young Baby Boomers entering the market and also to wealth appreciation for the same.
By whose definition? Certainly the massive suburban expansion in the 60's and 70's resulted in affordable homes to young Baby Boomers entering the market and also to wealth appreciation for the same.
By definition that every trade has two parties. Those boomers are now sitting on house wealth for the same reason that millennials without family wealth are priced out of home ownership.
If we built more housing, prices would go down for millennials, and those boomer’s investments wouldn’t look as good.
One way of putting it: pick a number of hours the average person should have to work over time to buy a house. If you want that number to stay the same, housing can only appreciate as quickly as wage inflation.
If we built more housing, prices would go down for millennials, and those boomer’s investments wouldn’t look as good.
One way of putting it: pick a number of hours the average person should have to work over time to buy a house. If you want that number to stay the same, housing can only appreciate as quickly as wage inflation.
[deleted]
samplatt(4)
But if houses don’t go up no body will want to own them anymore.
People will want them for the original reason to want a house: so that you have somewhere to live.
Worth extending that to: somewhere to live where you have more control over your tenure there (can't be kicked out year by year), and ability to make more than basic changes to your living environment (knock down a wall, add an extension, etc).
I remember as I approached 20, I was watching the real estate market weekly and bought my first property at around 22 (which felt two years later than I wanted). I expected that the market would grow slowly, but that aforementioned control over the home was the main factor for me at that time. Now I bet it feels like you buy ASAP or get priced out of the market for the duration of your working life.
I remember as I approached 20, I was watching the real estate market weekly and bought my first property at around 22 (which felt two years later than I wanted). I expected that the market would grow slowly, but that aforementioned control over the home was the main factor for me at that time. Now I bet it feels like you buy ASAP or get priced out of the market for the duration of your working life.
You can live in an apartment.
I want a house as a place where I can remain, do meaningful changes to, like install permanent air conditioner; and, have a stable mortgage for several decades without having to keep hopping to keep payments low.
I'd love someone in one of the "strategy" arms in one of these funds to explain what they think the end result of this is at it's extent?
Do they believe that eventually these will be sold back to single families to build equity?
Do they think that, the primary asset which has driven middle class wealth growth for ~100 years is now perfect for liquidating into - what?
Is the goal to make everyone a renter forever?
Do they believe that eventually these will be sold back to single families to build equity?
Do they think that, the primary asset which has driven middle class wealth growth for ~100 years is now perfect for liquidating into - what?
Is the goal to make everyone a renter forever?
I think it's the last one. It's the ultimate subscription.
Single family homes are about the worst thing you can rent out if you're not counting on appreciation.
Eh it’s a depreciating asset, which you can write off over 27.5 years. There are plenty of advantages for owning SFR as an investment.
And this article was written when rates were still stupidly low.
And this article was written when rates were still stupidly low.
In Australia at least, I'd guess that standalone homes are at the juncture of 'rentable' and 'appreciation of the base land' (which is usually what is rising in value).
Land can be subdivided as lifestyles change. A house can be extended or rebuilt with a second storey. An apartment can generally be updated internally on the same footprint, but not much more. Institutional buyers would be well positioned to redevelop a house to semi-detached dwellings, or apartments, or retirement facility.
Here, over 30 years to mid-2022, houses rose 453%, units 306%. In the last ten years only, that same change was 82% for houses, 47% for units.
Land can be subdivided as lifestyles change. A house can be extended or rebuilt with a second storey. An apartment can generally be updated internally on the same footprint, but not much more. Institutional buyers would be well positioned to redevelop a house to semi-detached dwellings, or apartments, or retirement facility.
Here, over 30 years to mid-2022, houses rose 453%, units 306%. In the last ten years only, that same change was 82% for houses, 47% for units.
For a long time the famous version of this in cities as parking lots.
Buy a lot, pace it as a parking lot which earns enough to cover taxes, and wait 10/20 years.
Buy a lot, pace it as a parking lot which earns enough to cover taxes, and wait 10/20 years.
Ummm
I know multiple people who have secured their life doing that, though with smaller homes (and of course, they prefer duplexes, but the right SFR works).
And, i don't know that many people!
I know multiple people who have secured their life doing that, though with smaller homes (and of course, they prefer duplexes, but the right SFR works).
And, i don't know that many people!
Did you factor out appreciation?
Because gambling on single family appreciation has been a great winning move for decades now, but if you factor out that almost all SFRs have negative cash-flow.
Well, they have negative cash flow but people endure that because of the leveraged appreciation.
Because gambling on single family appreciation has been a great winning move for decades now, but if you factor out that almost all SFRs have negative cash-flow.
Well, they have negative cash flow but people endure that because of the leveraged appreciation.
I did't do their math.
The people I know that are doing this seem to do well.
I do not know if that is because of the low mortgage rates up until last year or if they have some other secret, like only buying houses they can get a positive cash flow from.
The people I know that are doing this seem to do well.
I do not know if that is because of the low mortgage rates up until last year or if they have some other secret, like only buying houses they can get a positive cash flow from.
"if you're not counting appreciation" is doing a whole lot of legwork in this sentence.
It's doing all the legwork - SFRs are negative cash flow, and the only reason to hold negative cash flow properties at the absolutely horrendous cap rates they have is because of appreciation.
But appreciation cannot go on forever or each property will be infinitely expensive and nobody will be able to afford them. It is a dance that will end at some point.
But appreciation cannot go on forever or each property will be infinitely expensive and nobody will be able to afford them. It is a dance that will end at some point.
Australia is a fantastic image of what happens in that process, and they don't show much sign of slowing, being even worse than the States' issues.
It can certainly go a lot longer than people will expect, and it will have weird side-effects (California also gives some hints, what with huge appreciation and prop 13).
The biggest hurdle now is the jump from renter (or living with parents) to homeowner; there used to be "starter homes" that could get you on the treadmill but even those are quite high.
Once you're on the treadmill it's not that bad as house prices in an area tend to be in lockstep, but that first step can be a big one.
The biggest hurdle now is the jump from renter (or living with parents) to homeowner; there used to be "starter homes" that could get you on the treadmill but even those are quite high.
Once you're on the treadmill it's not that bad as house prices in an area tend to be in lockstep, but that first step can be a big one.
Or, the end result is a separation of lords and serfs, where the very few that can buy houses own all of them and no one else does.
This is about cashflow. Consistent cashflow at that. To achieve that everything needs some sort of subscription model. Rent is the subscription model for housing. These consistent cashflows then can be bundled into some sort of financial products and sold to investors -- something similar to the financial products during the 2008 crash. Just that now instead of interest payments which might crash, rents can be stabilized. Even if things go wrong equity is still protected due to the house.
My guess is that houses are an inflation-resistant asset. It's a good place to dump money if you have too much. And the downside is limited by political inertia: most voters own homes and would suffer if their house lost value, so the American political system will sacrifice much to prevent housing prices from going down too much.
1. Find a place with a growing population and restrictive zoning
2. Corner the housing market
3. The population keeps growing but the restrictive zoning means more housing doesn't get built
4. More people competing for the same housing stock means prices increase
Whether they keep the housing forever or not isn't what they're thinking about, they can decide later.
2. Corner the housing market
3. The population keeps growing but the restrictive zoning means more housing doesn't get built
4. More people competing for the same housing stock means prices increase
Whether they keep the housing forever or not isn't what they're thinking about, they can decide later.
Restore serfdom.
> I'd love someone in one of the "strategy" arms in one of these funds to explain what they think the end result of this is at it's extent?
You buy homes in a region if you think the population will rise, interest rates will be relatively low, job prospects will be stable, etc which will lead to increasing home values.
Whether they want to profit by flipping the homes or by renting them, I don't know. But it's a bullish bet on texas home prices by people who could politically influence human migration policy ( both domestic and foreign ), fed policy/interest rates and even jobs/economy. Meaning they can place the bet and pull the strings to make the bet pay off.
You buy homes in a region if you think the population will rise, interest rates will be relatively low, job prospects will be stable, etc which will lead to increasing home values.
Whether they want to profit by flipping the homes or by renting them, I don't know. But it's a bullish bet on texas home prices by people who could politically influence human migration policy ( both domestic and foreign ), fed policy/interest rates and even jobs/economy. Meaning they can place the bet and pull the strings to make the bet pay off.
Karl Marx answered all of these questions back in the 20th century.
19th century my guy
I'm more of a Proudhon guy myself
worked fabulously for those who took his answers to heart!
Like Pol Pot who only seemed to have read the manifesto?
many others who had read more than that but with similar results
My conspiracy theory is that this is part of a broader "medical-device-ification" of every service or product that is specific to natural persons and our ceremonies and culture. Wedding cakes are 10x cost of other cakes. Coffins are 10x cost of other boxes. Medical devices are 10x cost of the same devices that aren't for medical care. It's spreading. Next is probably houses. Then maybe every food and maybe later clothes. Meanwhile the corporations are ruthlessly and competently and incessantly negotiating among themselves, keeping the B2B non-natural-persons goods at normal prices while the ones for actual humans skyrocket. This causes a different amount of inflation observed by people compared to the ones observed by corporations. Thanks for coming to my tedx talk.
"Wall Street" is a bit disingenuous.
From the original study: "We defined institutional buyers as companies, corporations, or limited liability companies (LLCs)."
It's very common for mom and pop landlords to buy homes through LLCs for liability protection.
It would be more fair to say "up to a third of Texas single family homes were bought as investments", rather than say "Wall Street" which infers some massive PE firm bought them up.
If you go to Canada, it's closer to 70% of recent purchased in the lower Niagara region of Ontario.
"Investors own 77 per cent of new condos in Waterloo region"
https://kitchener.ctvnews.ca/investors-own-77-per-cent-of-ne...
From the original study: "We defined institutional buyers as companies, corporations, or limited liability companies (LLCs)."
It's very common for mom and pop landlords to buy homes through LLCs for liability protection.
It would be more fair to say "up to a third of Texas single family homes were bought as investments", rather than say "Wall Street" which infers some massive PE firm bought them up.
If you go to Canada, it's closer to 70% of recent purchased in the lower Niagara region of Ontario.
"Investors own 77 per cent of new condos in Waterloo region"
https://kitchener.ctvnews.ca/investors-own-77-per-cent-of-ne...
> It's very common for mom and pop landlords to buy homes through LLCs for liability protection.
As a side node, for mom and pop landlords this is more of a myth than actual liability protection.
It's arguably more useful to keep various properties separate so you can sell them easier than anything else. Maybe some liability protection if the LLC is named such that people don't realize you own it, but any actual liability lawyer will see right through it.
As a side node, for mom and pop landlords this is more of a myth than actual liability protection.
It's arguably more useful to keep various properties separate so you can sell them easier than anything else. Maybe some liability protection if the LLC is named such that people don't realize you own it, but any actual liability lawyer will see right through it.
This is true. Just plopping a property into an LLC doesn't give you automatic liability protection. It has to be treated as a separate business.
And even if it is a separate business, you probably only get protection from things like unpaid bills, etc. Liability (especially criminal liability) will pierce the LLC quite rapidly.
"The rentier class" would be a more accurate description, yes.
But massive PE firms absolutely are buying up homes. So much so that it's getting really hard to operate in this market profitably if you're a small time player.
Still seems like a reasonably proxy for “financial investors” (as opposed to the accidental investors who bought a starter home at the right time, and now it’s grossly inflated value makes it the checkbook for all four college educations).
And though I think you acknowledge this point, but a lot of people with mom and pop landlords don’t realize that mom and pop are definitionally real estate investors.
And though I think you acknowledge this point, but a lot of people with mom and pop landlords don’t realize that mom and pop are definitionally real estate investors.
Mom and pop are definitionally not "Wall Street" investors which is what the article is labeling the purchasers.
Just increase interest rates and keep them around 6 percent forever. I'd bet many of these Wall Street funds stop buying SFHs. Federal reserve wants to keep the interest rates around 2 percent, because anything higher than that means that the inflation in the states is rising. Keeping the interest rates low (hence, the appearance of low inflation) is a facade to keep the USD as the reserve currency.
Agreed. As long as we are to have a continually inflating currency, the primary responsibility/expectation for monetary creation needs to be moved to the legislative/executive branches of the government - so the new money can at least be directed to purposeful endeavors. As opposed to the system of the past several decades whereby the Federal Reserve continually decreases interest rates, making most new money flow to the banks who then just use it to continue bidding up the leveraged asset bubble.
Just curious, but what exactly do you mean by the appearance of low inflation?
federal funds rate should be more than the calculated inflation rate. So, both interest rates and the calculated inflation should be 'manipulated' at the same time. So far, we know the federal reserve sets/manipulates the interest rate, but there is a hidden incentive to set/manipulate the inflation rate, as both of them needs to be in sync. Since the USD is the world reserve currency, interest rates in every other countries are based on the federal reserve interest rate. So, there is an incentive to keep the interest rates low in the states, hence the appearance of, or the desire to set, low inflation. Just sanctions regime, military power, NATO are not enough to keep the USD as the reserve currency; low interest rate (low inflation in the states) is also necessary besides sanctions, army, NATO, etc.
Everyone has been saving up waiting for the big crash to finally buy a home. Since this is a popular personal finance bet currently being made, it’s no surprise that others are skating towards where the puck is going. Wall Street is eyeballing all these little war chests potential buyers have and deciding they would like to see those as rent payments forever instead. If your plan is total conquest, then it makes sense to overpay—the more hotels you put on the Monopoly board, the sooner you take all the other players’ money anyway. If institutions overpay, the big crash everyone expects doesn’t happen.
I feel this basically _guarantees_ a crash in the long term. Sure, they keep the puck going since it's a self-perpetuating feedback loop, untill it's not anymore and the prices have increased to unsustainable levels. And then the crash comes. Eventually, I expect it to happen.
No, I did not bet on this though, I bought my apartment in 2021 since... You know, I needed a place to stay and felt at the moment the inflation was bound to hit hard.
No, I did not bet on this though, I bought my apartment in 2021 since... You know, I needed a place to stay and felt at the moment the inflation was bound to hit hard.
Oh, so the vaunted religion of the "free market" doesn't solve all of society's ills? It creates social ills?
Say it ain't so!
People have been saying this for next to forever and their concerns are always pooh-pooh'ed.
Seriously, if the free market doesn't work for the housing market, one of the most transparent and elastic markets that exist, then what does it work for? I find it hard to believe Americans are seriously proposing limiting the property one can buy. After all, "Wall Street" is a useful fiction - at the end of the day it's just people.
Say it ain't so!
People have been saying this for next to forever and their concerns are always pooh-pooh'ed.
Seriously, if the free market doesn't work for the housing market, one of the most transparent and elastic markets that exist, then what does it work for? I find it hard to believe Americans are seriously proposing limiting the property one can buy. After all, "Wall Street" is a useful fiction - at the end of the day it's just people.
The reason these houses are being bought is the exclusionary zoning which makes it impossible to build new ones. The housing market is not free, the government has set up extremely onerous regulations to ensure that housing always increases in value, of course investors will see that and want in. The solution here is obvious, stop writing zoning laws that ensure housing always gets more expensive.
First of all, I want to be clear that I completely agree that the "free market" doesn't work. It doesn't work because it's a thought experiment—an abstraction, like the infamous "spherical cow in a vacuum".
...But to refer to the housing market as "elastic" just strikes me as patently absurd.
Unless I'm deeply misunderstanding what you're referring to, elasticity requires that the product be fungible and the demand be non-urgent. Every single person needs a place to live, which means that in many, many cases, the demand is extremely urgent. Furthermore, a house in Houston is not at all interchangeable with a house in Wink, TX (a random town an hour west of Odessa I just picked out on a map). Even two dwellings of comparable price within the same city may not be at all interchangeable due to different locations, amenities, etc.
All of this just goes, however, to prove your broader point: that the free market doesn't work, because there isn't one.
...But to refer to the housing market as "elastic" just strikes me as patently absurd.
Unless I'm deeply misunderstanding what you're referring to, elasticity requires that the product be fungible and the demand be non-urgent. Every single person needs a place to live, which means that in many, many cases, the demand is extremely urgent. Furthermore, a house in Houston is not at all interchangeable with a house in Wink, TX (a random town an hour west of Odessa I just picked out on a map). Even two dwellings of comparable price within the same city may not be at all interchangeable due to different locations, amenities, etc.
All of this just goes, however, to prove your broader point: that the free market doesn't work, because there isn't one.
You're correct. The housing market is transparent, but it's mostly inelastic. Which is actually a more important point: the free market doesn't even work in theory in inelastic markets. Oh well. I guess the beatings will continue until morale improves.
I live in an area of New England where property values have basically doubled in the last few years (since spring of 2020). Yeah I get that people moved up here in a kind of reactionary moment during covid, but it doesn't completely explain how housing costs increased at such a rate and keep growing even as we are in a quote-unquote lull in the housing market during higher interest rates. You cannot buy a home here without offering cash at over asking price.
I hate to be conspiratorial but there are times when I think this market is so irrational that there is some kind of larger force at play. It's not like the pandemic created more demand for homes -- if anything (and I hate to be morbid about this) there should be fewer buyers in the market and yet everything continues too tick up. And on top of that the rental market is completely irrational as well.
It's really hard not to give in to the idea that the market for housing isn't being manipulated by larger forces.
I hate to be conspiratorial but there are times when I think this market is so irrational that there is some kind of larger force at play. It's not like the pandemic created more demand for homes -- if anything (and I hate to be morbid about this) there should be fewer buyers in the market and yet everything continues too tick up. And on top of that the rental market is completely irrational as well.
It's really hard not to give in to the idea that the market for housing isn't being manipulated by larger forces.
Look at the amount of money that Wall Street has access to since 2020 began and it should tell you everything you need to understand what caused this. Your dollar is suddenly worthless.
https://fred.stlouisfed.org/series/M1SL
https://fred.stlouisfed.org/series/M1SL
"In May 2020, the Federal Reserve changed the official formula for calculating the M1 money supply.
Prior to May 2020, M1 included currency in circulation, demand deposits at commercial banks, and other checkable deposits.
After May 2020, the definition was expanded to include other liquid deposits, including savings accounts. This change was accompanied by a sharp spike in the reported value of the M1 money supply."
Prior to May 2020, M1 included currency in circulation, demand deposits at commercial banks, and other checkable deposits.
After May 2020, the definition was expanded to include other liquid deposits, including savings accounts. This change was accompanied by a sharp spike in the reported value of the M1 money supply."
How convenient to change the definition at the same time that a tectonic shift in monetary policy occurs
WTF happened? how did they get access to so much?
The federal reserve divorced the dollar from the gold standard in the 1970s.
It can issue as many dollars as it wants at will. There is nothing to stop it except the destruction of the global economy if it becomes too reckless. See Zimbabwe Hyperinflation to see what happens when the central bank becomes unhinged. My friend still has a 100 trillion dollar note on his fridge from that period.
It can issue as many dollars as it wants at will. There is nothing to stop it except the destruction of the global economy if it becomes too reckless. See Zimbabwe Hyperinflation to see what happens when the central bank becomes unhinged. My friend still has a 100 trillion dollar note on his fridge from that period.
[deleted]
Ah I just figured why rents are rising in every single city in the world. Wall Street is building another real estate bet
[deleted]
(2022)
What sorts of tax policies might preferentially disincentivize home buying by investment funds?
Homestead exemption on property tax. In some states, property taxes are set by law to be astonishingly high unless the owning entity lives on the property for more than half the year. That owning entity can then legally claim the homestead exemption on their property taxes which reduces the tax owed by a specific amount. The owning entity can only claim the homestead exemption on (at most) a single property.
Property taxes cannot be set too high in some areas, though. For example, it is pretty common in Minnesota for families to own a primary home in the big metro areas and a second vacation property in northern Minnesota on a lake, to the point where it is basically an institution in Minnesota. It also has a very positive effect on the tourist economy in northern Minnesota. Since families cannot claim the homestead exemption on the vacation properties, property taxes cannot be set too high otherwise the tourist economy would collapse, so the city, county, and state administrations need to walk a fine line on non-homestead property tax amounts to prevent institutional investing in homes while still enabling families to own vacation properties.
Property taxes cannot be set too high in some areas, though. For example, it is pretty common in Minnesota for families to own a primary home in the big metro areas and a second vacation property in northern Minnesota on a lake, to the point where it is basically an institution in Minnesota. It also has a very positive effect on the tourist economy in northern Minnesota. Since families cannot claim the homestead exemption on the vacation properties, property taxes cannot be set too high otherwise the tourist economy would collapse, so the city, county, and state administrations need to walk a fine line on non-homestead property tax amounts to prevent institutional investing in homes while still enabling families to own vacation properties.
A tax on the speculative portion of the home (land).
This is just so fucked a world. This is pillaging America, ruining Americanism. And we can scarcely blame these foes of society for their petty villiany.
People want their home to be an 'investment' and rules get created to protect the investment and keep home prices going up. This is the natural result of those policies. In a world where supply can keep up, home prices are stagnant and extracting rents from land is not as great of a deal.
I am not sure but my gut tells me this is far far too convenient a narrative. I don't think this is such an explicit choice. The free hand steals from us. Without such consent. Easily & readily.
Mind explaining what “Americanism” is?
Banks running rampant purchasing assets from distressed sellers seems as American to me as apple pie.
Banks running rampant purchasing assets from distressed sellers seems as American to me as apple pie.
America of the latter 20th century was seen as a place where you can go from rags-to-riches in a generation. It's still like that, but social mobility is falling quickly.
Wallstreet buying houses is a continuation of the on-going wealth entrenchment that betrays the ideal of fluid social mobility.
Wallstreet buying houses is a continuation of the on-going wealth entrenchment that betrays the ideal of fluid social mobility.
[deleted]
you are right and, recent tax analysis on adults in the USA showed more than a million filing adults with financial resources to purchase a house and are not doing so.. complicated dynamics are playing out in real time.
I'd be curious about that data. Their age, what percentage of their income would be required to purchase a home, what quality of home they could afford, if they have kids, etc.
And is it money to afford a home somewhere or where they currently reside? Is this trying to say "New Yorker millenials are too stuck up to buy a home in Nebraska"?
Just anecdotal, but we're perfectly capable of owning in the place we recently moved (Portland), but are renting because of market uncertainty. I'd rather miss out and have homes go 100 up than miss out and have them go 300 down right after purchasing. We're happy to rent for a bit and wait it out.
I'd guess more generally people are playing that game purely based on borrowing rates -- if they think they'll be even a bit lower in 12 months, it might make financial sense to wait.
I'd guess more generally people are playing that game purely based on borrowing rates -- if they think they'll be even a bit lower in 12 months, it might make financial sense to wait.
I don’t see home prices coming down - ever, but that’s me.
Interest rates? Good point. But I’d jump now, refinance later.
I’ve been burned more often waiting than getting in too soon.
Interest rates? Good point. But I’d jump now, refinance later.
I’ve been burned more often waiting than getting in too soon.
The issues is with Mr. Potter's America vs. George Bailey's America.
This is what happens when you put your country up for sale. Money equals speech and corporations are people too, so why wouldn't they buy houses?
[deleted]
Well, the fed ruined stock and bond prices with raising interest rates. You can’t just sit on a pile of dollars because rampant inflation will ruin its value. Real estate is probably all that’s left to invest in?
There are actually productive sectors of the economy that can and need to be invested in. We have a lot of work to do still with logistics, raw materials and energy. It's problematic when so-called ''safe'' bets like real estate end up eating the vast majority of capital rather than it being invested on things that will actually change our quality of life.
Completely agree. The politicians should be tweeking the laws so these sectors become more attractive for investment but alas all they care about is the next election and aggravating homeowners /voters.
The idea of houses being owned by people will decline over time until it's only for the mega wealthy - everyone else is a renter.
The companies building up their portfolio of residential housing include Blackrock Capital and JP Morgan - say hello to your new landlords.
The governments could do something about this but they won't.
It's coming to Australia too - the Treasurer Jim Chalmers has met with these corporate mega landlords and he has explicitly stated he is working to "clear away the barriers to investment".
The socialists in Berlin are working to stop the corporate megalandlords - filthy socialists - all they think about is "the people" - no-one consider the needs of Blackrock Capital and JP Morgan...