Feels like non news. Or at least, a continuation of existing trends.
We don't build enough housing, so housing becomes a good investment, eventually pricing out everyone except existing investors or people with large assets. We' structured the system so that once you're in you're IN. Leverage, 30yr mortgages, tax deductions all continue to subsidize existing homeowners at the expense of everyone else (who are technically a minority).
If this continues, expect to see more and more radical policy proposals by young people.
some_random · 1m ago
Non news to you maybe, but I would have predicted an order of magnitude below and I suspect most of the public shares my less-informed view.
hristov · 2h ago
The fact that it is a continuation of existing trends does not mean we should treat it as a non story and not take note of it.
cumbotron · 59m ago
This is a very important thing to point out. So often, issues that affect normal people negatively are only afforded a little bit of coverage once in a while. If the trend persists and it is still negatively affecting the citizenship, it deserves to be in the news.
dymk · 2h ago
“Private equity firms should not be allowed to own all the land” isn’t a particularly radical policy proposal
alright2565 · 2h ago
> Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.
throwup238 · 1h ago
They don’t provide any concrete evidence for how they classify “mom and pop” (to be fair i haven't had the time to read the original paper). It’s standard operating procedure to split investment properties between many subsidiaries to limit the financial splash damage. It’s mostly a legal fiction because the property managers are directors of multiple corporations managing dozens of properties, but the courts haven't cracked down on it yet. I’m suspicious of whatever statistics they use to classify investors.
(I’m speaking only of the investors that buy to rent extract, I have no insight into the flippers)
tcbawo · 1h ago
LLCs need to declare the beneficial owner(s), which is supposed to give transparency and KYC to corporate structures like that.
rubyn00bie · 1h ago
Not when they’re funneled through states like Wyoming and Nevada which an enormous amount of them are… both have very good privacy laws protecting the owners identity. Often times there will be a local LLC which is owned by (at least one) separate out of state LLC in Nevada or Wyoming obfuscating who the true owners are. There’s a whole industry behind this.
paulryanrogers · 1h ago
Sounds like a federal law is needed to pierce these exploitive veils.
giantg2 · 1h ago
It's actually not, because it's a non-issue. The privacy of a Wyoming LLC doesn't mean protection. Your name isn't on any of the public records documents, but a court order can still force the disclosure of the interested parties.
ythiscoyness · 51m ago
Having to go through getting a court order sounds like an issue for this non issue.
Why should that be a thing? More cheesy obfuscation games to protect some random a-hole?
These rich who don’t want to be on the hook for other’s healthcare sure make a lot of demands of everyone else.
Covid just taught us we can stand to shed a few million and be fine. Purge the rich.
If no one else is on the hook for my life story fuck theirs.
dboreham · 1h ago
Not since the regime change in January.
giraffe_lady · 1h ago
Shit even if not something like that, 5 homes in the middle quintile in my city would be around 2.4 million dollars. That's the entire net worth of a middle class family at the end of their earning years, including their house. The only people whose mom and pop have that kind of money to invest are rich folks. It's just as much a problem as the other thing in practical terms.
minraws · 17m ago
Why is the cut off at five more than 2 homes per person shouldn't be allowed.
And 1 or 2 extra farm lands...
Like what are you going to do with your 5th home???
intrasight · 30m ago
That was my mom and pop in the 80s they bought about one house a year. Empty derelict houses purchased from the city for between $1000 and $15,000. The city provided matching grants to fix them up. Also the city paid the rent for the Cambodian and Vietnamese migrants that came here to live. My parents invested the organization and literal sweat equity to fix up these homes.
blindriver · 1h ago
1 home qualifies you as an invrestor? So I’m an investor? That definition is whacked it should be at least 2 homes.
jodrellblank · 1h ago
“I own no homes, and am buying a home”
“I own one home, and am buying a house”
“That makes you an
investor”
“No that’s whack. When I buy a third - buying while owning two - then I will be an investor”
You have an off-by-one error.
potato3732842 · 1h ago
You're being intentionally stupid to make a point. In the real world not internet comment sections this is called dishonesty.
Owning one home and buying another with intent to liquidate the first one is not "investing" since the asset is still illiquid and you still only own the one you live in when it's all said and done. Appreciation and whatnot are all secondary to the function of being a residence.
Purchasing stuff you won't personally use with intent to use said stuff to make income is, whether it's a house or something else.
Whether you arrange the sentences to make it look like that happens at 1 or 2 doesn't matter.
phil21 · 1h ago
These stats are tracking folks who buy a second property intended as an investment - typically renting it out but not always.
You’re not a mom and pop landlord if you’re just buying a second home to move into with intent to sell your current one.
selimthegrim · 1h ago
I own no homes, and must scream.
sorcerer-mar · 1h ago
1 and 5 non-primary residence.
MangoToupe · 58m ago
I'm sorry I have zero sympathy for anyone who owns three homes. Fuck em
axus · 46m ago
Divorced people with 2 homes each that remarried and ended up with 4 homes? I've seen it happen. Finally they sold 2 of those homes..
xarope · 22m ago
I feel there's a major distinct difference between;
- a well off family who buys a 2nd home to make sure their kids are set
- a group of well off investors who pool funds, buys a 2nd home, with intention to "flip" it in the next 1-2 years and make 10%
Both are "investors", but I'd like to think the 1st are trying to build a better future, whereas the 2nd are just arbitraging.
paulryanrogers · 1h ago
Who needs more than two? You can only live in one at a time.
Why let the rentier class grow any larger than they already are?
It's not like there is an oversupply of desirable housing. And even if there were an oversupply, the answer isn't to incentivize the rich to get richer.
MBCook · 2h ago
There’s nothing wrong with investing by buying homes.
Just pay a 75% tax when you do.
If you can find places to make money with those taxes, have at it.
But you’ll stop messing with normal people’s attempts to buy a house for the most part.
peab · 2h ago
Yeah, we definitely still need homes to be available for rent.
If you move a lot, or want to be able to move easily and explore different cities or even neighborhoods within a city, renting is way easier than if you'd have to go through the hassle of buying.
What sucks is when private companies start owning too many houses and they have unfair advantages over regular folks. For example, they have teams of lawyers.
No comments yet
kelipso · 2h ago
There’s lots wrong with buying up homes for investing so that prices of homes go up and people can’t afford homes. It’s some kind of flawed myopic morality that says there’s nothing wrong with it.
epgui · 1h ago
You're completely missing the point of the comment you're replying to, though.
The parent comment suggests that the cost of investing is not high enough. Moreover, they suggest that it should not only be a higher cost, but that this cost should be redistributive.
zdragnar · 1h ago
The proposed cost isn't redistributive, though. The investors aren't running a charity, and there's an inelastic supply, so they'll be passing the cost of all of those taxes on to the renters until they have a comfortable margin again.
lazide · 1h ago
People aren’t “buying up homes for investing so that prices of homes go up and people can’t afford homes.”
That may be an aggregate and long term effect, but i’ve never seen anyone actually motivated by something like that.
At least not statistically.
People with excess money (often dentists, doctors, middle managers, small business owners, etc), who don’t trust stocks or the banks, are buying houses because they think they can rent them to people for cashflow in the future (aka not have to eat dogfood!), or rent them out now to other people for money. People that otherwise couldn’t be in these houses, or those people would be buying them instead.
Aka put their money to work.
IMO, people doing that right now are going to lose their shirts, but that is risk/reward. I could be wildly wrong.
kelipso · 1h ago
I am not saying it’s their motivation, but it is the end result. And since that is the end result, it is immoral.
I’m sure every person and corporation has some reason for buying homes in excess, but it’s still wrong because homes and land are limited resources that people need to live.
blindriver · 1h ago
Why do you think they will lose their shirts
potato3732842 · 1h ago
When everyone gets sick of it and votes for punitive taxes on residential property that is not owner occupied.
I would prefer they deregulate the living shit out of constructing additional housing so all the small money can get into that (i.e. something productive instead of literal rent seeking) instead but I am not hopeful.
dboreham · 1h ago
This has happened in places like Scotland but I doubt it'll happen in the US. And if it did, courts would strike the law on the grounds "can't take property".
carlhjerpe · 29m ago
It's important to enable your abusers
appreciatorBus · 1h ago
A lot of people over the last few decades have invested in electronics and computer manufacturing, and today electronics and computers are cheaper than they have ever been. If we’re going to have a theory about why housing is expensive it’s going to have to be deeper than just the idea that investing in something makes the price go up.
kingstnap · 1h ago
What a ridiculous comparison.
Electronics are made in a factory. Houses are expensive because land near cities and work is scarce.
potato3732842 · 1h ago
Housing is expensive in large part because of how illiquid supply is. This is in large part because the fixed compliance costs of doing work upon "land near cities" is high. I'm not talking the $50 permit. I'm talking the $50-500k worth of engineering and lawyers and whatnot you need to bulldoze a 1-family and put in an N-family even in a place zoned for it. You typically wind up going rounds with the city at every step just because while you're nominally allowed to do whatever it is you have to bicker over everything like parking and setbacks and whatnot that are nebulously defined for the purpose of allowing the .gov to extract concessions. This is why only big money 5-over N apartments get built. When you have a ton of fixed costs nothing less makes sense.
mr_toad · 1h ago
The rapidly expanding supply of electronics and computing equipment drove prices down. Housing supply has not kept up with demand. It’s Econ 101.
em-bee · 1h ago
the key word is manufacturing. the article is talking about buying homes, not building them. if all those people would invest into building new homes as opposed to buying existing ones then the comparison would make sense and maybe the price of homes would indeed go down.
xphos · 1h ago
I don't think you understand who the tax hurts in that case. If investors can pass that tax off to a renter, than this type of policy just hurts renters. It seems similar to rent to control its great if you own a house but you ultimually create a shortage that has a lot more slient unknown victims. The real solution is to just build more housing in places people want it so that renting it becomes insanely cheap because there is a glut of supply. It also drives the cost of houses down but I think that might be for the better despite hurting my bottom line as a single family house owner
9cb14c1ec0 · 56m ago
Or maybe have such a large housing supply that supply drives down profits to where large investors look elsewhere.
dennis_jeeves2 · 40m ago
>Just pay a 75% tax when you do.
Make it 100.
BuyMyBitcoins · 2h ago
I suggest that any tax on multiple home purchases should scale, and be different depending on whether or not an individual or a corporation is doing the buying.
MBCook · 1h ago
I wonder about that.
If someone’s a billionaire and wants to play around by buying houses? Is that any better than an investment company doing it for the market?
How do you tell the difference between a rich person buying their third vacation home and buying a house they intend to sell for profit in a year or two through speculation?
Of course, on the other side, I’m aware of companies that own some company housing to let their employees use. How do you tell that from investing?
Maybe since they weren’t really doing it to make money they wouldn’t really care that the tax would be high when they sold it if they made a big profit.
It all gets really sticky. No special taxes gains on your primary residence, may be a lower tax (that 75% of what’s er) on a secondary residence.
But pretty quickly if you have that many houses personally you can probably afford to pay a high tax on gains. You’re not really what we want to optimize the market for anyway.
I just guessed at a big number. Maybe it should be 50%. Maybe it should be 90%. I have no idea. It seems like it should be legal, there have got to be cases where it might be useful. Buying and flipping houses from dilapidated neighborhood by turning it into something better.
I’m at the age where I wouldn’t mind a house. But they’re all gigantic, expensive, or both in my area. I have no idea how a normal family is ever supposed to afford one.
lazide · 1h ago
As the boomers start dying off in larger waves, a lot of inventory will start getting onto the market.
SoftTalker · 51m ago
They’ll mostly be leaving the houses to their kids, I’d think. Unless they’ve already pulled all the equity out with HELOC spending.
paulryanrogers · 1h ago
Investor money may just soak it all up though, especially as certain policies make other avenues less stable.
And unlike Boomers, corporations can live forever. Permanently raising the ladder.
WalterBright · 2h ago
Distorting markets like that tend to have unforeseen deleterious side effects that just make things worse.
For example: rent control
Avicebron · 2h ago
"Markets" exist because they are a thing people find useful. If people can't afford shelter and participate in the "market" of leveraging property because they are being pushed out by a soulless outgrowth of "line go up" thinking, then the "market" has failed and needs to be fixed until it is useful for people again.
Manuel_D · 1h ago
Sure, but if the price of housing is too high then price controls won't fix it either. You'd end up with no availability, or a decades-long waitlist for rent-controlled apartments like Stockholm.
The issue with housing affordability is that the market is often prevented from responding to high demand and low supply by regulation. SF is very restrictive with permitting housing construction, despite the incredibly high rents. It's not that the market forces are failing to incentivize housing construction, it's that developers are prevented from responding to market demand.
Qwertious · 18m ago
>Sure, but if the price of housing is too high then price controls won't fix it either. You'd end up with no availability
You're assuming a baseline of a functional market system.
If you have widespread price-fixing between landlords (say, via everyone using the same algorithm service that gives everyone the same recommendation) then rent control isn't introducing a price fix, it's just changing the level of price fixing.
If you can only rent for $X000, but the rent price is fixed to at least $X500, then for you, there might as well be no availability - the landlord is leaving the place vacant due to the price-fixing.
kyboren · 29m ago
Hallelujah. Shout it from the rooftops!
Markets are powerful tools--perhaps the most powerful tool we have to shape human interactions. But too many people believe in a sort of market gospel ("Supply Side Jesus"); that market forces are as inevitable and inflexible as the force of gravity. In reality, policy choices shape markets and careful market design can deliver politically-favorable outcomes.
Markets work for us, not the other way around. "You shall not crucify mankind upon a cross of gold!"
derektank · 2h ago
It's not the fault of private capital firms that local governments have essentially outlawed building new homes in many areas. The solution should be focused on restricting the ability of localities to do this, not restricting the ability of companies to buy real estate.
xphos · 1h ago
Yeah I agree with this here. Its simply to hard to build housing and the number permits and zoning restrictions have lead to localized housing shortages where people want to live. Its simply a difficult poltical issue to solve because most of the time zoning is handled at the local level and old people who have houses attend town hall meetings where zoning is discussed (if seldomly ever). Homeowners who have treated housing as a speculative centeralized asset have little to gain in allowing the market fixing itself.
Qwertious · 17m ago
It kind of is, though. The political economy is a thing, lots of companies lobby for favourable legislation.
Avicebron · 1h ago
> It's not the fault of private capital firms
Which doesn't really matter because they don't need to be "protected" in any capacity. Removing their ability to purchase those homes, and letting it get sorted between the people who are "outlawing building homes" and those who want to move there makes more sense.
anigbrowl · 51m ago
“Ground rents are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Ground rents are, therefore, perhaps a species of revenue which best bear to have a particular tax imposed upon them.”
“As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed and demand a rent even for its natural produce.”
“A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground.”
“The sea in the neighbourhood of the islands of Shetland is more than commonly abundant in fish, which make a great part of the subsistence of the inhabitants. But in order to profit by the produce of the water, they must have a habitation upon the neighbouring land. The rent of the landlord is in proportion, not to what he can make by the land, but to what he can make both by the land and water. It is partly paid in sea-fish.”
Karl MArx? No, Adam Smith.
zefhous · 2h ago
How one defines “distorting markets” is an important question when it comes to defining policy, and not an un-contentious one.
dymk · 1h ago
Well, what we have right now obviously isn’t working. So what’s your proposal?
WalterBright · 51m ago
Return to free markets in housing.
anigbrowl · 48m ago
Got anything more specific than cliches? For example, do you have any examples of this demonstrably making housing more affordable (ie lowering housing costs as a percentage of income) at scale?
WalterBright · 23m ago
Rent control making creating more rental units unprofitable. Zoning laws that prevent housing density.
hooverd · 2h ago
rent control is good actually combined with robust building
amanaplanacanal · 1h ago
Rent control has a tendency to kill robust building.
thrance · 1h ago
So basically remove all regulations and everything will fix itself automatically? This kind of wishful thinking is ludicrous, and it's insane how common it is. Markets have issues that need to be addressed through regulations, unless we want a return to the Gilded Age.
WalterBright · 48m ago
> So basically remove all regulations and everything will fix itself automatically?
I didn't say that. I said "rent control". And yes, remove all regulations on rent.
> unless we want a return to the Gilded Age
The Gilded Age was a time of great prosperity in the US.
dragonwriter · 34m ago
> The Gilded Age was a time of great prosperity in the US.
In aggregate, sure. (At least compared to times prior.)
How the prosperity was distributed, OTOH...
WalterBright · 17m ago
Wealth isn't "distributed" in a free market. People work and invest to get money in exchange.
Consider Jeff Bezos. He was roundly criticized for the profligacy of spending $80 million for his wedding. But look at it another way. He spread the wealth around by paying artisans, workers, craftsmen, photographers, travel agents, hotels, restaurateurs, etc.
dietr1ch · 15m ago
Private equity shouldn't be able to own housing. It should be like new highways and tolls, you get to charge until you make up for your investment, but then people who live there or the government should own it.
Want to keep your toll business? Build more housing.
hollerith · 13m ago
I have a different take. I feel housing is important enough that the government (i.e., the voters) shouldn't be able to interfere in the market for it, e.g., shouldn't be able to restrict who can buy and who can sell a house or apartment building.
darth_avocado · 1h ago
If you want cash poor people to compete with cash rich private equity in the housing market without banning PE completely, you need to make it cheaper for cash poor people to borrow money. That too isn’t a particularly radical policy proposal. A lot of countries across the world do it with positive outcomes.
physicles · 1h ago
Didn’t we do that in the lead up to the 2008 financial crisis? Remember NINJA loans?
anigbrowl · 52m ago
Even Adam Smith fulminated against landlords, who he saw as parasitical free riders.
conradev · 1h ago
Yep, pass that, free up a few percentage points of inventory, good wealth transfer to the rest of existing entrenched investor base. They might even come leased!
CBLT · 2h ago
That's the desired outcome. What's the policy proposal?
dymk · 1h ago
Disallowing companies from owning residential housing would be a start
StanislavPetrov · 1h ago
How about we start with no home-based deductions for corporations. The means depreciation, vacancy, any sort of loss is not tax deductible for a corporation. If a corporation owns 100 homes, it may cost them nothing (or close to nothing) to keep 10 (or more) of those homes vacant, because they can simply deduct the costs from those vacant homes from the massive profits they are reaping on the other 90 and lower their tax burden.
The average person who owns a second home for rental purposes is highly motivated to get that home rented out, even if it means lowering the rent to attract a renter, because it can be financially ruinous to pay for the taxes and an upkeep if it stays empty.
freddie_mercury · 2h ago
Why not?
Are PE firms worse landlords than mom-and-pop landlords?
I do a lot of "focus group" style conversations and one theme is "why do people think the economy is so bad for them right now?" A perception that the housing market is unfair comes up a lot, particularly complaints that investors are buying up all the houses.
Ithaca recently got an ordinance to encourage alternative dwelling units (ADU, aka "granny flats") but boy was it a knock-down drag-out because so many people were up in arms about AirBNB conversions and Private Equity getting involved in buying and building properties. As I'm seeing it Ezra Klein's "Abundance" theme is closely linked to Matt Stoller's "antitrust" theme both in the sense that monopolies are one reason "why nothing works" and that anger at them is dominating the public imagination.
strongpigeon · 2h ago
It’s an almost YoY doubling of the Q1 2024 rate (14.8%, 13.1% and 13.8% for 2024, 2023 and 2022) [0], which seems pretty significant. Though, what’s interesting is that the share bought by institutional investor is shrinking per the article.
> If this continues, expect to see more and more radical policy proposals by young people.
The inability of people (specifically ex-soldiers) to acquire land and make a living provided a platform for Julius Caesar to take control of Rome and effectively end the Republic.
dboreham · 1h ago
Hence Romania.
patcon · 2h ago
Yes, more radical policy proposals are my expectation too.
When the status quo is already extreme (re: property ownership), the appropriate response will seem even MORE extreme because we've gotten used to that opposite one.
rayiner · 1h ago
Journalists are, on average, shockingly innumerate. Here is Brian Williams (famous anchor) and Mara Gay (NYT Editorial Board member) thinking that $500 million is enough to give all 327 million people in America $1 million: https://www.independent.co.uk/news/world/americas/msnbc-bloo....
Note that this was pre-planned. They had a little graphic overlay prepared for this and everything. Probably a dozen people laid eyes on this and they didn't catch it. If you're a functioning human, your gut-level understanding of the world should have caught this. It would be like reporting that the weather in phoenix this weekend will be 327 degrees F.
It reminds me of my dad's story of watching about the moon landing on TV from Bangladesh. The guy next to him said he didn't believe it, because "how did they break through the dome of the sky?" That's what American reporters are like with statistics and economics.
SoftTalker · 45m ago
How did they break through the dome in the sky?
The rocket had a sharp point on the top.
anigbrowl · 44m ago
So what? You're just deflecting attention from this story to a poorly researched one written by someone else. That's like me saying people should ignore anything you say because some other lawyer used ChatGPT in court. Do better.
rayiner · 10m ago
OP explained why this article displayed a bit of economic ignorance, insofar as the framing is confused about what’s the real story. I’m simply providing broader context.
That is, if I start hallucinating citations it’s fair to compare me to AI!
jiggawatts · 1h ago
The economist Alan Kohler on Australia's ABC News has a great quote: "For housing to no longer outstrip incomes, it has to become a bad investment."
The "how" of it doesn't matter. Could be changes to taxation, investment rules, foreign buyers, whatever. The point is that no matter what, for housing to stop getting more expensive faster than people's incomes, it has to be a bad investment.
Right now, in Australia, housing is a fantastically good investment, earning ludicrous incomes for people basically doing nothing but sitting on some property. It has created a new social class of the "landed gentry" that can earn income without usefully contributing to the economy.
The new nobility will not give this up willingly.
xphos · 1h ago
I really enjoyed this quote but you know the old nobility didn't give it up easier so you probably could drop the "new".
I need to look up Alan Kohler
jongjong · 41m ago
In Australia, I'm a software engineer and don't own property so I'm a peasant but my parents are in the noble class. I'm finding it increasingly difficult to find things to talk about with them because almost everything that happens to me is bad and they can't relate.
So every topic we talk about seems to dissolve into some detailed complaint about how the system is screwing over people and it makes my parents uncomfortable. But then I can't talk about my work since it's too technical for them so I literally have nothing else to talk about since I work all the time. I can't discuss politics because they think everything is fine politically, so I stopped talking about that too. I picked up some outdoor hobbies so thankfully I have that to talk about; at least until my workload increases and salary drops to the point that I don't have time for hobbies anymore and can't afford to go on holidays.
The class divide is so strong, my life's goal shifted from "become a tech millionaire" to "try to save a deposit for an apartment" to now "just survive 30 years". If I can survive 30 years, I will become noble and I will finally understand what it feels like to be happy.
But because I'm a peasant and constantly stressed with a horrible lifestyle, I think there's a possibility I'll die before my parents. I try to teach my toddler son about the importance of money. I had my son quite late because I couldn't afford to have a child sooner. I worry he won't understand the importance of money so I wrote letters for him in case he ends up inheriting at a young age to explain how money works and how horrible my life has been without money. I already started planning with my wife how we're going to get him married into money when he is older.
bix6 · 2h ago
And no replacement births.
bee_rider · 1h ago
On the bright side, the folks who bought houses as investments might see that investment collapse along with the population.
potato3732842 · 1h ago
I think it's as much a social problem as a numbers one. The greatest generation and the silent generation were rich enough to buy up tons of property but mostly didn't. In contrast every thousandaire boomer and gen X is trying to get into the rental game.
So it's possible we get to a point where a minority of the people own enough housing that the rest just vote to say fuck 'em.
paulryanrogers · 59m ago
> the rest just vote to say fuck 'em.
The rentier class has tools to prevent such coordinated voting. They divide us with scare tactics on fringe issues, religion, encourage over identifying with things/movements/celebrities, etc.
I'm afraid things would have to fundamentally and undeniably bad to rally enough people to change things. It's amazing how much folks with overlook or rationalize if given an effective distraction, like fear or hate.
dylan604 · 2h ago
And yet just a couple of days ago, HN threads were saying the opposite that stories about non-private ownership was essentially FUD.
aaomidi · 1h ago
And now there’s money in preventing building more housing.
It’s a bad cycle as lobbying spending will convince harder than people not being able to afford homes.
davidw · 11m ago
There was already money in preventing it. In a link I posted elsewhere about a hearing, the same people raised nearly $8,000 to try and stop one apartment building from going up in their neighborhood.
Not private equity, not 'tHe ChINesE' (or whichever 'bad' foreigners are currently in vogue), but wealthy local NIMBYs.
7e · 2h ago
The problem isn’t a lack of housing, it’s a lot of breeding. US population has doubled since 1950. It quadrupled since 1900.
As long as people keep having babies in excess of the replacement rate, housing will always be good investment. They don’t make any more land, and the earth is, frankly, full.
darth_avocado · 1h ago
Problem is absolutely lack of housing and population growth has nothing to do with it.
Average house size was about 1000 sqft in the 1900 and average household size was 5. This remained relatively the same in 1950 where the average household size was 4. These days, the average size of a house is 2600sqft and household size is 3. We have created a system where we build fewer larger houses. This is because policy (often dictated by people who already own houses) makes it impossible to build small high density housing or even if it is possible to build it, it’s not profitable.
sorcerer-mar · 1h ago
You should consider getting in an airplane and meandering around and reporting back on how full the earth is.
derektank · 2h ago
The US birth rate hasn't exceeded the replacement rate since the 1970s
lazide · 1h ago
With immigration though, it definitely has.
Supermancho · 1h ago
> The problem isn’t a lack of housing, it’s a lot of breeding.
> As long as people keep having babies in excess of the replacement rate
To reiterate, the thread was about "breeding". The birth rate has fallen behind.
You are referring to the overall population growth being due to immigration. This may be true, but is unrelated. Respond to the post about why overpop is driving the housing pricing, not to the factual corrections.
appreciatorBus · 1h ago
People don’t live in land, they live in floorspace, and we can make plenty of that if we choose.
jfengel · 2h ago
Much of the news lately has been about how we're going below the replacement rate, and somehow that's also a crisis.
AnimalMuppet · 1h ago
The US is nowhere near full.
ch4s3 · 45m ago
Almost none of the purchases are PE firms, the vast majority are small investors who own 1-5 properties.
From the article:
> Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85%
Mid sized and large real estate investors make of most of the rest. PE firms account for 0.5-2% of the market.
*edit anyone downvoting this should make an effort to refute what I’m saying with some facts.
some_random · 4m ago
First off, this is only for homes sold in the first 3 months which based on the extremely limited data I've looked at[1] seems to meaningfully below the total number of homes sold. With that said, this is still way more than I expected, I probably would have guessed closer to 2.7% than 27%.
> Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties
In my social circle, if you are going to buy a new house, you are doing everything you can to keep your current house while purchasing the second. It is the clearest path to retirement from traditional 40hr/week employment for the people around me.
> Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
Talking about these two cohorts in the same article may be problematic as they such vastly different motives, operating procedures, and (please don't light me on fire) different regulations needed.
wepple · 1h ago
> In my social circle, if you are going to buy a new house, you are doing everything you can to keep your current house while purchasing the second. It is the clearest path to retirement from traditional 40hr/week employment for the people around me.
That’s fascinating to me. Generally, the homes people buy to live in aren’t optimal investment properties. Why not sell and buy something optimized for return and growth?
mousethatroared · 31m ago
That's the first order analysis. It's correct within its assumptions, but it neglects leverage.
But if you bought a place before the pandemic you could lock in a ridiculously low interest rate for 30 years.
Now you have the value of the mortgage (leverage) locked at an interest rate lower than inflation. Let's say rent covers expenses and mortgage. The return on an initial $50k down on a 250k property might be around $10k/year, or 20%.
Tell me, where does one get an investment returning 20% annum?
Real estate is the easiest and safest way to leverage your investment.
therealdrag0 · 35m ago
Why wouldn’t it be a good house to rent? It’s usually not tourist rental (airbnb), it’s long term living rental (annual lease). Anyone who doesn’t own has to rent an apartment or house.
Theres also a chunk of people who “don’t believe in debt” so even when they have kids and live in a house they rent until they can pay cash. Or there’s young people who get together in a group of 4 and rent a house to share etc etc.
danny_codes · 1h ago
Land rents are pretty great in the US at least. Landowners get bailed out by taxpayers when times are hard in many instances. Plus laws are generally designed to protect land rents.
kasey_junk · 1h ago
That doesn’t change the question though. Why would the house you bought last likely be good for renting out? There are much better properties out there generally for residential cash flow.
But the probable answer is mortgages. If you got a 30 year mortgage for less than 3% you almost certainly want to do anything you can to keep your hands on it. It’s probably the best financial device ever given to the average consumer.
ryandrake · 59m ago
When supply is as constrained as it is, any house is good for renting out.
ledauphin · 20m ago
because of your existing mortgage rate
ChrisMarshallNY · 2h ago
I have a friend who is a real estate broker for a rental property investment company.
His company goes into neighborhoods that are often struggling, buy houses for cash, gut them, then rent them.
They have a lot of buying leverage, because there's no mortgage to deal with. They just slap down the cash.
That's one way that higher interest rates cause problems. It's hard to compete with someone that can hand you a cashier's check for $500,000.
terminalshort · 1h ago
Cash doesn't really give you much more leverage. A seller really couldn't care less where the money comes from as long as they get paid. Cash will get you a better price in the case where a seller really needs to sell instantly, but that's a rarity. Most of the time the higher offer wins regardless of how the buyer finances it.
ryandrake · 1h ago
When we were buying a house, we made offers on around 30 properties, and about 10 of them lost out to lower dollar value cash offers. In a hot real estate market, nobody wants to deal with any contingencies.
ChrisMarshallNY · 1h ago
According to my friend, the issue is that financed deals frequently fall apart at the last minute.
Cash is more secure, when you turn down a bunch of offers for one that goes belly-up, at the end.
adgjlsfhk1 · 54m ago
The leverage cash gives you is convenience. A normal buyer will have very specific times they can do the transaction (since they need to almost finish selling their house before they can buy yours). Showing up with cash offers means that the buyer can be done right now.
jihadjihad · 1h ago
I’m having a little trouble squaring the circle of “neighborhoods that are often struggling” and “a cashier's check for $500,000”, but maybe it is a regional US thing.
zdragnar · 32m ago
It is very regional. An older house on 5 acres (2 hectare / 20k square meters) could go for $300k. $500k could get you a really nice house. Picking a random rural area in a random midwest state found this beauty: https://www.landsearch.com/properties/16167-160th-st-letts-i...
The homes investors would look to pick up to flip and sell or rent would go in the $80-120 range in this area, I'd think.
ChrisMarshallNY · 1h ago
In Long Island, cheap houses are a half mil.
I suspect that the Bay Area is even worse.
giraffe_lady · 1h ago
My neighborhood is like this. It's been underresourced and neglected for decades, but is well connected to transit and is adjacent to more prestigious neighborhoods.
The buildings being bought are 2-4 unit apartment rental buildings, and quite old, so 300-500k is typical. Then they're downzoned into single family homes or possibly two condos and resold for about double the price I think.
Obviously the ones using (and then losing) them as rental housing and the ones buying are completely different groups.
bradfa · 1h ago
Lots of banks now offer “cash equivalent” mortgages. You do more to pre qualify and the bank locks you in with some contracts but then you can make a cash equivalent offer that has no mortgage contingency which can close just as fast as an all cash offer.
SamDc73 · 2h ago
The solution is simple: loosen regulation around building, and let people build more!
When houses become an investment, that's when you start screwing young people!
And it stops being an asset if you just simply build more
I don't think you understand LVT based on this "not to mention the political debates/decisions over what constitutes "fully utilized"."
LVT doesn't require any such determination.
Anyway, I'm not opposed to the solution you mention as well. We should subsidize supply of housing, and supply at any price will serve the same purpose of driving prices down, so yes I agree we should build public housing for higher price points.
No comments yet
greenie_beans · 1h ago
i no longer buy the YIMBY argument as the sole reason we have a housing crisis. it's a very convenient narrative if you work in/around real estate and a lot of smart people have been duped by it. we had no problem in the past building housing with current regulations: https://fred.stlouisfed.org/series/HOUST
to be clear, regulations is part of the problem in some markets but not everywhere. how are local regulations causing a housing crisis everywhere? this problem is happening everywhere, and local municipalities across the country didn't coordinate to cause this.
they stopped building after GFC bc it was too risky. market dynamics, the profit incentive, and now the cost for labor + material + borrowing costs is the problem.
Why would a larger supply stop private equity from buying it all?
Manuel_D · 1h ago
If loads of housing is built and the price of housing starts dropping, firms won't want to invest in housing because they'll lose money. Unfortunately, a lot of politically active home owners also want to keep the price of housing from dropping so this is a harder thing for local governments to put into practice.
AnimalMuppet · 1h ago
Because if you get zoning out of the way, we can keep building, and keep building, and keep building.
Let them keep buying. But if we build enough, they won't be able to rent it all out. Are they going to keep buying to control the rent-able supply forever? No, they'll run out of money before we run out of buildable land. (Maybe not before we run out of wood, shingles, and labor though...)
davidw · 1h ago
They don't have the cash. Housing is a huge market.
Downvote all you want, but math is math.
mattmcknight · 1h ago
It's not even a long article, but why are so many of the comments ignoring the end of it? "Indications are that institutional investors are scaling back home sales." from the article would seem to contradict a large number of the comments.
--
"Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.
Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
And that number could get smaller, amid signs that large institutional investors are scaling back home purchases.
Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought, according to data from Parcl Labs."
mathfailure · 1h ago
What a weirdly chosen set of buckets [1,5] and [6,10]. What'd be the percentages for buckets like [0,1] homes and [2,∞)?
ryandrake · 52m ago
Yea really weird. 1 home usually doesn’t even mean you are an investor: you just own one home and live in it. And then 5 homes? That’s not what anyone would think of as “mom and pop.” That’s a very large real estate investment business.
I’d just ignore people with one home because they are not investors. Have one “mom and pop” bucket for people with 2 homes, one rented out, and then another bucket for businesses with 3+ homes, 2+ rented out.
crazygringo · 2h ago
If investors are buying homes to rent them out, then is this really a bad thing?
I know a lot of people who have struggled to find homes to rent when they need to move to a new city with a family for a shorter-term job like a year or two. All the homes available are for sale, none are to rent.
If it's to rent, it's not taking any living space off the market.
And with elevated mortgage rates, it could be smart for people to rent now rather than buy, waiting to buy until interest rates come down.
viraptor · 2h ago
Ideally you want a reasonable balance. And the prices low enough that paying off a mortgage is not too far away from paying the rent. But if 27% is pure corporate investment pushing up the prices - yes, it's bad.
crazygringo · 2h ago
> But if 27% is pure corporate investment pushing up the prices - yes, it's bad.
But it's not "pure corporate". Quite the opposite. From the article:
> mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.
I really don't see anything wrong with mom and pop buying a second or third home to rent out for extra income.
And I don't see anything inherently wrong with 27% either. If there aren't enough rental homes, then an increase in the share of investors is exactly what you need to achieve the "reasonable balance" you're talking about. And then there's nothing bad about it -- it's exactly what's best.
jfengel · 1h ago
Having investment money inherently raises the price of rentals. There is a gap between how much the renters could conceivably pay and the minimum for which the house could be built and maintained. The actual price will be somewhere between the two. But if they are competing against investors, putting more money into the demand side, the price that renters actually pay is pushed towards their potential limit.
That is not what's best; it just concentrates more money in the hands of the investors.
Manuel_D · 1h ago
> There is a gap between how much the renters could conceivably pay and the minimum for which the house could be built and maintained. The actual price will be somewhere between the two.
No, not necessarily. If there's enough competition for renters, then the homeowner may have to rent at a loss. Renting at a loss is still preferable to no collecting rent at all. Getting $90 on a $100 investment is bad, but better than getting $0 on a $100 investment.
peab · 2h ago
yeah, having homes available to rent is pretty important
Avicebron · 2h ago
rent is fine, as long as it's feasible to rent and buy a place later one, _just_rental_ at paycheck to paycheck pricing isn't solely viable either.
dmbche · 2h ago
1. Isn't that a big if in itself?
2. Keeping houses off market and renting them for a profit is a bad thing as it is harvesting the money the renters could be putting to the side to buy a house AND hikes the price of houses, making it even harder for renters to become owners.
Can't your friend buy and then sell when they are ready to move?
crazygringo · 2h ago
1. I mean, investors invest to make money. You make money by renting. Otherwise you're just throwing money away, which isn't what investors like to do.
2. In general, rent payments are less than mortgage payments for the same property (though this can vary in specific cases due to a number of factors). So the point is the renters get to save more money than they would with a mortgage.
And the problem with buying and selling is the realtor fee on both ends. You can't buy and sell a house every year or two. You'd go broke real quick.
haiku2077 · 2h ago
> In general, rent payments are less than mortgage payments for the same property (though this can vary in specific cases due to a number of factors).
This didn't seem true to me - Anecdotally, my friends pay more in rent for apartments than I do for my mortgage on a single-family home in my area.
Then I googled it, and turns out my city is one of the top five US cities with the highest ratio of renting vs owning cost, and indeed a place where it costs nearly twice as much to rent as it does to own.
crazygringo · 2h ago
> and indeed a place where it costs nearly twice as much to rent as it does to own.
Which is exactly where the supply and demand is out of whack. But fortunately, the more people buy places to rent out, the cheaper it becomes to rent.
The renters in your area would love if investors bought a ton of properties and rented them out, increasing supply and therefore bringing down rates! And if rents are really 2x mortgage payments, then there should be tons of people lining up to do so, since it's basically just free money lying around. The invisible hand and everything.
elcritch · 1h ago
Unless they're all using price-fixing software to form a de facto cartel to keep prices high.
dmbche · 2h ago
1. Investors make money by doing other things than renting properties, do they? Even property investors are able to sell at a profit.
It is mental gymnastics to say that renters are saving by renting.
And about realtor fees, that sure would affect my decision to move or not. Or to rent an appartment/condo, which is almost always possible, especially in urban centers.
crazygringo · 2h ago
1. Not really? You make money by renting until you sell. What other things are you talking about?
2. And lots of homeowners are cost-burdened too. What's your point? The US is an expensive place for everything. Mortgage rates are crazy expensive now too.
It's not mental gymnastics to say you can save by renting. There are lots of online calculators where you can see the places in the US where it's cheaper to rent than to buy.
And sometimes you have to move for a job, period. And families don't always want to rent an apartment, they want to rent a house with a backyard, you know?
dmbche · 1h ago
1. So investments can be in other sectors than housing, I've heard. I'm sure you can look it up. Or you're welcome to lecture me too.
2. If a homeowner has more than one property, why not sell one of the properties when you become cost burdened? Also, I think at some point you stop paying a mortgage, right? I don't think that's the case with renting.Oh and it's a neat financial tool too, a mortgage.
So yeah renters would be better off owning, other than in some niche situations.
I don't understand what brings people to move for jobs if the salary doesn't make housing trivial for them. You're saying people on a 50k salary will move cities rather than change jobs?
Edit0: and that link I sent earlier that you probably didn't open shows that renters on average pay 30% of income on housing, while owners with mortgages paid 20% and 10% without a mortgage. Renters are the in the absolute worst situation however you want to cut it.
xur17 · 2h ago
> Can't your friend buy and then sell when they are ready to move?
They can, but because of realtors these 2 transactions will end up costing 12% of the cost of the house.
dmbche · 2h ago
Thanks!
I've not had a job where I moved for the salary/advantages, but I imagine I would only do so if the conpensation made it so that 12% fee seemed negligeable.
davidw · 1h ago
People want to blame The Bogeyman so bad, but the answer is usually right around the corner in their own neighborhoods:
Someone should do a startup that focuses on designing a sort of RV that can be mass produced, for millenials, genZ, and so on. Maybe they could be modular, link them up for communal living, that sort of thing.
Climate change isn’t going to be stopped. Don’t get tied to some dirt that’ll be inhospitable before too long. And houses are generally full of obsolete crap anyway, like bad electric wiring, rooms without ethernet, and big empty rooms that need to be inefficiently climate controlled.
Tech folks should really lead the way on this. If you are remote and have a high wage, why don’t you live in some futuristic RV off in some idyllic countryside?
OneDeuxTriSeiGo · 1h ago
This is pretty naive. RVs are almost as infamous as boats are as giant pits for burning money. They are perpetual maintenance hell in a way that houses rarely are.
ugh123 · 1h ago
Yes, currently.
ares623 · 1h ago
AGI will fix entropy
ugh123 · 1h ago
Fully agreed, there is a major opportunity with younger people but it would still take cultural shift, rather than just technological change. Someone, maybe a popular influencer(s), would sell it (ideologically) the best, rather than traditional marketing.
TheBlight · 1h ago
Have you lived in an RV for very long? After a few days it kind of sucks.
bee_rider · 1h ago
~6 months (in an RV, not a more hospitable mobile home). I’ve had worse apartments. Not through winter, though. Millions of people have more experience than me (I’m sure) but a couple days is a pretty low bar.
I’d definitely say it wasn’t ideal, the waste situation was certainly not great without a septic tank hook-up! But it is a something that can be iterated on. NIMBYs, on the other hand, there just isn’t any traction there at all.
danny_codes · 1h ago
Plumbing is nice. Definitely prefer to have plumbing. And rooms.
tehjoker · 1h ago
This sounds like gold plating the refugee lifestyle
codingwagie · 2h ago
Financial engineering is why people are poor. They are literally competing for goods and services with investment firms.
aspenmayer · 1h ago
Meritocracy looks a bit different when individuals standing alone are expected to go toe to toe with multi-industry corporate conglomerates and their franchisees.
stephenhandley · 1h ago
Outlaw corporations from owning single family homes.
mattmcknight · 1h ago
"Mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%
Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
And that number could get smaller, amid signs that large institutional investors are scaling back home purchases.
Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought, according to data from Parcl Labs."
bryanlarsen · 2h ago
Don't more than 27% of Americans rent rather than own the housing they live in? It appears 36% rent. Doesn't this mean that the share of owner-occupied housing is going down, not up as the headline implies and readers are assuming?
kasey_junk · 1h ago
You can’t extrapolate anything about owner occupancy rate broadly from this stat because it’s about who _bought_ in a short period.
If 28% of sellers that quarter were investors then the owner occupancy rate went up.
Now I suspect that’s not the case but if you look at home ownership rates for non-investors they stay in a very tight couple of % points in the mid 60s and they track interest rates. This has been true since the US started making home ownership a governmental priority post ww2.
Prior to that it was in the 40s for as far back as I could find any data.
jfengel · 1h ago
I can't vouch for what readers are assuming, but the headline is intended to say that more people are renting because more homes are going to institutions who don't occupy them.
The implication is that this drives up the price for renters, because the demand side includes not just money from people seeking a place to live, but much larger amounts of money from other markets.
appreciatorBus · 1h ago
If those homes had been purchased by an owner occupiers, then there would be that many fewer homes for rent, causing rent to go up.
The implication of these article is always that investors are somehow unfairly competing against homeowners. But there is only one fixed pool of people competing for housing - something that reduces supply for buyers is increasing it for tenants and vice versa.
dmbche · 1h ago
I don't know how it works, but if a renter becomes an owner (i e. A home is purchased by and owner occupier) there is one less renter and one less house available, remaining in balance and prices shouldn't move?
appreciatorBus · 1h ago
Sure but that is also true going the other way.
There's a fixed pool of ppl who need housing (aka the entire population of the country) and a relatively fixed pool of interior floorspace to divvy up among them.
Whether each person chooses to/prefers to/is forced to rent or buy is not the driving force behind rent and price changes
Rents & prices are moving because the amount of floorspace that exists (in places people want to live) is much lower than the aggregate amt of floorspace people would like there to be. Each month, everyone who needs to buy/sell/rent is forced to play a game of musical chairs. If you don't have a lot of $, you are going to be one of the people w/no chair, and be forced to leave.
In any normal market this would trigger vast increases of floorspace (or chair) manufacturing, but in the anglosphere we have convinced ourselves that there is only one true way to live - in a square box with a triangle on top - and we forbid almost every other form on most land, making it extremely difficult to increase the # of chairs.
dmbche · 58m ago
Very appreciated!
bryanlarsen · 1h ago
If 27% of new homes are purchased by investors and 36% of old homes are owned by investors, then math says that this lowers the percentage of homes owned by investors. (27% * x + 36% * y) / (x + y) -> a number between 27 and 36.
asdf6969 · 1h ago
What percentage of people live in a rental? All rentals were at some point bought by investors. Unless they’re a much smaller volume of total sales (held longer?) then it seems ok even though the number sounds alarming
charcircuit · 1h ago
A lot of traditional buyers buy a house as an investment as they plan to sell it before they die or have their children inherit it.
BMc2020 · 2h ago
Glad we could help M. bin Salman park his money somewhere safe.
No comments yet
mathfailure · 1h ago
If demand is so high - where's your capitalism's rule that supply should rise to meet the demand??
darth_avocado · 1h ago
Because it’s not free market capitalism. Zoning, NIMBYs, over regulation etc. all together ensure supply demand economics don’t work the way they should.
bell-cot · 2h ago
> ... investor-owned homes account for roughly 20% of the nation's 86 million single-family homes, the firm said.
> Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.
> Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
> ...
> Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought ...
SO - how many of those mom-and-pop investors are mostly buying homes as investments? Vs. how many are building a well-to-do lifestyle, with a "cabin on the lake up north", and "winter condo in Florida"? (Or buying homes for their less-well-to-do children, maybe with some inheritance tax dodges baked in?)
EDIT: The issue with "investor" is here:
> Nearly 27% of all homes sold in the first three months of the year were bought by investors -- the highest share in at least five years, according to a report by real estate data provider BatchData.
How much does BatchData actually know about the finances and lifestyles of the "mom-and-pop" buyers which it has labeled as "investors"? (Vs. "developers", or "fixer-uppers", or multi-home lifestylers, vs. ...)
I don't think we can tell.
twoodfin · 2h ago
“Mom-and-pop” operations holding 1-5 homes sound like classic single-family developers who tackle a small handful of homes at a time.
Detrytus · 2h ago
For me it sounds more like upper middle class family investing their savings in rental properties instead of stock market.
dmoy · 2h ago
> cabin on the lake up north
*inner Minnesotan twitching*
fldskfjdslkfj · 1h ago
There should be no such thing as single family zoning.
tedk-42 · 2h ago
The rich are eating the poor and the middle class are fighting for the scraps.
kaycebasques · 2h ago
It's only a 5-year high. Do they not have data before 2020? I need data over a much longer timeframe than 5 years to determine how interesting the 27% number is.
qcic · 2h ago
27% of homes sold, not 27% of US homes. The title is completely misleading.
Not a shocker, given high interest rates usually drive down prices, and investors are not getting mortgages. Great investment to keep value, not so much for growth.
cowsandmilk · 2h ago
> investors are not getting mortgages
I don’t know of any real estate investor who doesn’t use mortgages. The norm is interest-only mortgages and not paying down principal at all.
howinator · 2h ago
The phrasing was clear to me on first read. I don’t think anyone would assume 27% of all homes are for sale in one 3 month period since that would imply every home is sold, on average, once per year.
qcic · 1h ago
Good for you.
rightbyte · 2h ago
Zillow and the likes flipping homes should raise the number too?
But anyway, the trend of corparations buying houses is really bad.
breckenedge · 2h ago
The article says that institutional investing (1000+ homes) is decreasing.
> Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
> And that number could get smaller, amid signs that large institutional investors are scaling back home purchases.
lotsofpulp · 1h ago
Zillow lost a lot of money trying to flip houses a few years ago and stopped.
WalterBright · 2h ago
Houses only have value if someone is living in them. Whether corporations buy them or not does not change the number of houses and the number of people living in houses.
yupitsme123 · 2h ago
Strangely, there's a ton of vacant commercial real estate in my neighborhood that the corporate landlords don't seem to be in any rush to rent out.
WalterBright · 47m ago
Such distortions are often the result of rent control.
dylan604 · 1h ago
Can they count empty units as loss so they can deduct it?
xenihn · 2h ago
Not true.
Do a google search for "rent-fixing algorithms".
If you own enough homes in a rental market, you can determine the market rate. An empty house has value simply by depleting local housing stock, since it is giving you greater leverage to drive market rate up.
Of course its less value than actually having it rented, but its still value. Tax code will also allow for softening the loss.
WalterBright · 41m ago
> If you own enough homes in a rental market, you can determine the market rate.
Only if the government has managed to prevent new construction.
Consider this: You aim to buy all 100 units, and then you can charge whatever rent you like, right? What happens is sellers discover you are doing this, and then raise their asking prices through the roof. The result is it costs you so much to get that monopoly that you cannot hope to be able to rent at a profit. Especially if it is possible to create new units for the purpose of selling at a high price to you. And it is possible, unless the government prevents new construction.
You cannot attain a monopoly unless there are major barriers to entry. In this case, it is government zoning that prevents new construction. In California, anyone can sue to block any new housing construction, bringing the construction market to a standstill and hence the highest home prices in the nation.
lazide · 2h ago
Depends on your definition of value. There are many investments structured in a way that mere ownership, as long as comps go up in the local market, will cause increases in value.
Don’t look down.
It’s also why the current admin seems really intent on bullying Powell into decreasing the fed rate - Trump and many of his friends are very exposed to real estate.
WalterBright · 46m ago
"Value" is what you're willing to pay for something.
MOARDONGZPLZ · 2h ago
Of course it does. Many houses remain empty because PE firms buy them and hold out for rents locals cannot afford.
WalterBright · 44m ago
Rent control plays a role in that.
If rents are not allowed to rise, the landlord risks locking in a low rent for the indeterminate future. It's a better play to leave it vacant until the rents rise.
We don't build enough housing, so housing becomes a good investment, eventually pricing out everyone except existing investors or people with large assets. We' structured the system so that once you're in you're IN. Leverage, 30yr mortgages, tax deductions all continue to subsidize existing homeowners at the expense of everyone else (who are technically a minority).
If this continues, expect to see more and more radical policy proposals by young people.
(I’m speaking only of the investors that buy to rent extract, I have no insight into the flippers)
Why should that be a thing? More cheesy obfuscation games to protect some random a-hole?
These rich who don’t want to be on the hook for other’s healthcare sure make a lot of demands of everyone else.
Covid just taught us we can stand to shed a few million and be fine. Purge the rich.
If no one else is on the hook for my life story fuck theirs.
Like what are you going to do with your 5th home???
“I own one home, and am buying a house”
“That makes you an investor”
“No that’s whack. When I buy a third - buying while owning two - then I will be an investor”
You have an off-by-one error.
Owning one home and buying another with intent to liquidate the first one is not "investing" since the asset is still illiquid and you still only own the one you live in when it's all said and done. Appreciation and whatnot are all secondary to the function of being a residence.
Purchasing stuff you won't personally use with intent to use said stuff to make income is, whether it's a house or something else.
Whether you arrange the sentences to make it look like that happens at 1 or 2 doesn't matter.
You’re not a mom and pop landlord if you’re just buying a second home to move into with intent to sell your current one.
- a well off family who buys a 2nd home to make sure their kids are set
- a group of well off investors who pool funds, buys a 2nd home, with intention to "flip" it in the next 1-2 years and make 10%
Both are "investors", but I'd like to think the 1st are trying to build a better future, whereas the 2nd are just arbitraging.
Why let the rentier class grow any larger than they already are?
It's not like there is an oversupply of desirable housing. And even if there were an oversupply, the answer isn't to incentivize the rich to get richer.
Just pay a 75% tax when you do.
If you can find places to make money with those taxes, have at it.
But you’ll stop messing with normal people’s attempts to buy a house for the most part.
If you move a lot, or want to be able to move easily and explore different cities or even neighborhoods within a city, renting is way easier than if you'd have to go through the hassle of buying.
What sucks is when private companies start owning too many houses and they have unfair advantages over regular folks. For example, they have teams of lawyers.
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The parent comment suggests that the cost of investing is not high enough. Moreover, they suggest that it should not only be a higher cost, but that this cost should be redistributive.
That may be an aggregate and long term effect, but i’ve never seen anyone actually motivated by something like that.
At least not statistically.
People with excess money (often dentists, doctors, middle managers, small business owners, etc), who don’t trust stocks or the banks, are buying houses because they think they can rent them to people for cashflow in the future (aka not have to eat dogfood!), or rent them out now to other people for money. People that otherwise couldn’t be in these houses, or those people would be buying them instead.
Aka put their money to work.
IMO, people doing that right now are going to lose their shirts, but that is risk/reward. I could be wildly wrong.
I’m sure every person and corporation has some reason for buying homes in excess, but it’s still wrong because homes and land are limited resources that people need to live.
I would prefer they deregulate the living shit out of constructing additional housing so all the small money can get into that (i.e. something productive instead of literal rent seeking) instead but I am not hopeful.
Electronics are made in a factory. Houses are expensive because land near cities and work is scarce.
Make it 100.
If someone’s a billionaire and wants to play around by buying houses? Is that any better than an investment company doing it for the market?
How do you tell the difference between a rich person buying their third vacation home and buying a house they intend to sell for profit in a year or two through speculation?
Of course, on the other side, I’m aware of companies that own some company housing to let their employees use. How do you tell that from investing?
Maybe since they weren’t really doing it to make money they wouldn’t really care that the tax would be high when they sold it if they made a big profit.
It all gets really sticky. No special taxes gains on your primary residence, may be a lower tax (that 75% of what’s er) on a secondary residence.
But pretty quickly if you have that many houses personally you can probably afford to pay a high tax on gains. You’re not really what we want to optimize the market for anyway.
I just guessed at a big number. Maybe it should be 50%. Maybe it should be 90%. I have no idea. It seems like it should be legal, there have got to be cases where it might be useful. Buying and flipping houses from dilapidated neighborhood by turning it into something better.
I’m at the age where I wouldn’t mind a house. But they’re all gigantic, expensive, or both in my area. I have no idea how a normal family is ever supposed to afford one.
And unlike Boomers, corporations can live forever. Permanently raising the ladder.
For example: rent control
The issue with housing affordability is that the market is often prevented from responding to high demand and low supply by regulation. SF is very restrictive with permitting housing construction, despite the incredibly high rents. It's not that the market forces are failing to incentivize housing construction, it's that developers are prevented from responding to market demand.
You're assuming a baseline of a functional market system.
If you have widespread price-fixing between landlords (say, via everyone using the same algorithm service that gives everyone the same recommendation) then rent control isn't introducing a price fix, it's just changing the level of price fixing.
If you can only rent for $X000, but the rent price is fixed to at least $X500, then for you, there might as well be no availability - the landlord is leaving the place vacant due to the price-fixing.
Markets are powerful tools--perhaps the most powerful tool we have to shape human interactions. But too many people believe in a sort of market gospel ("Supply Side Jesus"); that market forces are as inevitable and inflexible as the force of gravity. In reality, policy choices shape markets and careful market design can deliver politically-favorable outcomes.
Markets work for us, not the other way around. "You shall not crucify mankind upon a cross of gold!"
Which doesn't really matter because they don't need to be "protected" in any capacity. Removing their ability to purchase those homes, and letting it get sorted between the people who are "outlawing building homes" and those who want to move there makes more sense.
“As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed and demand a rent even for its natural produce.”
“A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground.”
“The sea in the neighbourhood of the islands of Shetland is more than commonly abundant in fish, which make a great part of the subsistence of the inhabitants. But in order to profit by the produce of the water, they must have a habitation upon the neighbouring land. The rent of the landlord is in proportion, not to what he can make by the land, but to what he can make both by the land and water. It is partly paid in sea-fish.”
Karl MArx? No, Adam Smith.
I didn't say that. I said "rent control". And yes, remove all regulations on rent.
> unless we want a return to the Gilded Age
The Gilded Age was a time of great prosperity in the US.
In aggregate, sure. (At least compared to times prior.)
How the prosperity was distributed, OTOH...
Consider Jeff Bezos. He was roundly criticized for the profligacy of spending $80 million for his wedding. But look at it another way. He spread the wealth around by paying artisans, workers, craftsmen, photographers, travel agents, hotels, restaurateurs, etc.
Want to keep your toll business? Build more housing.
The average person who owns a second home for rental purposes is highly motivated to get that home rented out, even if it means lowering the rent to attract a renter, because it can be financially ruinous to pay for the taxes and an upkeep if it stays empty.
Are PE firms worse landlords than mom-and-pop landlords?
Ithaca recently got an ordinance to encourage alternative dwelling units (ADU, aka "granny flats") but boy was it a knock-down drag-out because so many people were up in arms about AirBNB conversions and Private Equity getting involved in buying and building properties. As I'm seeing it Ezra Klein's "Abundance" theme is closely linked to Matt Stoller's "antitrust" theme both in the sense that monopolies are one reason "why nothing works" and that anger at them is dominating the public imagination.
[0] https://www.realtor.com/news/trends/real-estate-investors-re...
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The inability of people (specifically ex-soldiers) to acquire land and make a living provided a platform for Julius Caesar to take control of Rome and effectively end the Republic.
When the status quo is already extreme (re: property ownership), the appropriate response will seem even MORE extreme because we've gotten used to that opposite one.
Note that this was pre-planned. They had a little graphic overlay prepared for this and everything. Probably a dozen people laid eyes on this and they didn't catch it. If you're a functioning human, your gut-level understanding of the world should have caught this. It would be like reporting that the weather in phoenix this weekend will be 327 degrees F.
It reminds me of my dad's story of watching about the moon landing on TV from Bangladesh. The guy next to him said he didn't believe it, because "how did they break through the dome of the sky?" That's what American reporters are like with statistics and economics.
The rocket had a sharp point on the top.
That is, if I start hallucinating citations it’s fair to compare me to AI!
The "how" of it doesn't matter. Could be changes to taxation, investment rules, foreign buyers, whatever. The point is that no matter what, for housing to stop getting more expensive faster than people's incomes, it has to be a bad investment.
Right now, in Australia, housing is a fantastically good investment, earning ludicrous incomes for people basically doing nothing but sitting on some property. It has created a new social class of the "landed gentry" that can earn income without usefully contributing to the economy.
The new nobility will not give this up willingly.
I need to look up Alan Kohler
So every topic we talk about seems to dissolve into some detailed complaint about how the system is screwing over people and it makes my parents uncomfortable. But then I can't talk about my work since it's too technical for them so I literally have nothing else to talk about since I work all the time. I can't discuss politics because they think everything is fine politically, so I stopped talking about that too. I picked up some outdoor hobbies so thankfully I have that to talk about; at least until my workload increases and salary drops to the point that I don't have time for hobbies anymore and can't afford to go on holidays.
The class divide is so strong, my life's goal shifted from "become a tech millionaire" to "try to save a deposit for an apartment" to now "just survive 30 years". If I can survive 30 years, I will become noble and I will finally understand what it feels like to be happy.
But because I'm a peasant and constantly stressed with a horrible lifestyle, I think there's a possibility I'll die before my parents. I try to teach my toddler son about the importance of money. I had my son quite late because I couldn't afford to have a child sooner. I worry he won't understand the importance of money so I wrote letters for him in case he ends up inheriting at a young age to explain how money works and how horrible my life has been without money. I already started planning with my wife how we're going to get him married into money when he is older.
So it's possible we get to a point where a minority of the people own enough housing that the rest just vote to say fuck 'em.
The rentier class has tools to prevent such coordinated voting. They divide us with scare tactics on fringe issues, religion, encourage over identifying with things/movements/celebrities, etc.
I'm afraid things would have to fundamentally and undeniably bad to rally enough people to change things. It's amazing how much folks with overlook or rationalize if given an effective distraction, like fear or hate.
It’s a bad cycle as lobbying spending will convince harder than people not being able to afford homes.
Not private equity, not 'tHe ChINesE' (or whichever 'bad' foreigners are currently in vogue), but wealthy local NIMBYs.
As long as people keep having babies in excess of the replacement rate, housing will always be good investment. They don’t make any more land, and the earth is, frankly, full.
Average house size was about 1000 sqft in the 1900 and average household size was 5. This remained relatively the same in 1950 where the average household size was 4. These days, the average size of a house is 2600sqft and household size is 3. We have created a system where we build fewer larger houses. This is because policy (often dictated by people who already own houses) makes it impossible to build small high density housing or even if it is possible to build it, it’s not profitable.
> As long as people keep having babies in excess of the replacement rate
To reiterate, the thread was about "breeding". The birth rate has fallen behind.
You are referring to the overall population growth being due to immigration. This may be true, but is unrelated. Respond to the post about why overpop is driving the housing pricing, not to the factual corrections.
From the article:
> Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85%
Mid sized and large real estate investors make of most of the rest. PE firms account for 0.5-2% of the market.
*edit anyone downvoting this should make an effort to refute what I’m saying with some facts.
[1]https://www.census.gov/construction/nrs/pdf/newressales.pdf
> Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties
In my social circle, if you are going to buy a new house, you are doing everything you can to keep your current house while purchasing the second. It is the clearest path to retirement from traditional 40hr/week employment for the people around me.
> Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
Talking about these two cohorts in the same article may be problematic as they such vastly different motives, operating procedures, and (please don't light me on fire) different regulations needed.
That’s fascinating to me. Generally, the homes people buy to live in aren’t optimal investment properties. Why not sell and buy something optimized for return and growth?
But if you bought a place before the pandemic you could lock in a ridiculously low interest rate for 30 years.
Now you have the value of the mortgage (leverage) locked at an interest rate lower than inflation. Let's say rent covers expenses and mortgage. The return on an initial $50k down on a 250k property might be around $10k/year, or 20%.
Tell me, where does one get an investment returning 20% annum?
Real estate is the easiest and safest way to leverage your investment.
Theres also a chunk of people who “don’t believe in debt” so even when they have kids and live in a house they rent until they can pay cash. Or there’s young people who get together in a group of 4 and rent a house to share etc etc.
But the probable answer is mortgages. If you got a 30 year mortgage for less than 3% you almost certainly want to do anything you can to keep your hands on it. It’s probably the best financial device ever given to the average consumer.
His company goes into neighborhoods that are often struggling, buy houses for cash, gut them, then rent them.
They have a lot of buying leverage, because there's no mortgage to deal with. They just slap down the cash.
That's one way that higher interest rates cause problems. It's hard to compete with someone that can hand you a cashier's check for $500,000.
Cash is more secure, when you turn down a bunch of offers for one that goes belly-up, at the end.
The homes investors would look to pick up to flip and sell or rent would go in the $80-120 range in this area, I'd think.
I suspect that the Bay Area is even worse.
The buildings being bought are 2-4 unit apartment rental buildings, and quite old, so 300-500k is typical. Then they're downzoned into single family homes or possibly two condos and resold for about double the price I think.
Obviously the ones using (and then losing) them as rental housing and the ones buying are completely different groups.
When houses become an investment, that's when you start screwing young people! And it stops being an asset if you just simply build more
Land prices rise with income. Through all places in all points of history.
The solution is a land value tax.
land value is only a small part of housing costs.
LVT doesn't require any such determination.
Anyway, I'm not opposed to the solution you mention as well. We should subsidize supply of housing, and supply at any price will serve the same purpose of driving prices down, so yes I agree we should build public housing for higher price points.
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to be clear, regulations is part of the problem in some markets but not everywhere. how are local regulations causing a housing crisis everywhere? this problem is happening everywhere, and local municipalities across the country didn't coordinate to cause this.
they stopped building after GFC bc it was too risky. market dynamics, the profit incentive, and now the cost for labor + material + borrowing costs is the problem.
this is a better solution: https://www.npr.org/2024/10/07/nx-s1-5119633/housing-crisis-...
Let them keep buying. But if we build enough, they won't be able to rent it all out. Are they going to keep buying to control the rent-able supply forever? No, they'll run out of money before we run out of buildable land. (Maybe not before we run out of wood, shingles, and labor though...)
Downvote all you want, but math is math.
--
"Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.
Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
And that number could get smaller, amid signs that large institutional investors are scaling back home purchases.
Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought, according to data from Parcl Labs."
I’d just ignore people with one home because they are not investors. Have one “mom and pop” bucket for people with 2 homes, one rented out, and then another bucket for businesses with 3+ homes, 2+ rented out.
I know a lot of people who have struggled to find homes to rent when they need to move to a new city with a family for a shorter-term job like a year or two. All the homes available are for sale, none are to rent.
If it's to rent, it's not taking any living space off the market.
And with elevated mortgage rates, it could be smart for people to rent now rather than buy, waiting to buy until interest rates come down.
But it's not "pure corporate". Quite the opposite. From the article:
> mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.
I really don't see anything wrong with mom and pop buying a second or third home to rent out for extra income.
And I don't see anything inherently wrong with 27% either. If there aren't enough rental homes, then an increase in the share of investors is exactly what you need to achieve the "reasonable balance" you're talking about. And then there's nothing bad about it -- it's exactly what's best.
That is not what's best; it just concentrates more money in the hands of the investors.
No, not necessarily. If there's enough competition for renters, then the homeowner may have to rent at a loss. Renting at a loss is still preferable to no collecting rent at all. Getting $90 on a $100 investment is bad, but better than getting $0 on a $100 investment.
2. Keeping houses off market and renting them for a profit is a bad thing as it is harvesting the money the renters could be putting to the side to buy a house AND hikes the price of houses, making it even harder for renters to become owners.
Can't your friend buy and then sell when they are ready to move?
2. In general, rent payments are less than mortgage payments for the same property (though this can vary in specific cases due to a number of factors). So the point is the renters get to save more money than they would with a mortgage.
And the problem with buying and selling is the realtor fee on both ends. You can't buy and sell a house every year or two. You'd go broke real quick.
This didn't seem true to me - Anecdotally, my friends pay more in rent for apartments than I do for my mortgage on a single-family home in my area.
Then I googled it, and turns out my city is one of the top five US cities with the highest ratio of renting vs owning cost, and indeed a place where it costs nearly twice as much to rent as it does to own.
Which is exactly where the supply and demand is out of whack. But fortunately, the more people buy places to rent out, the cheaper it becomes to rent.
The renters in your area would love if investors bought a ton of properties and rented them out, increasing supply and therefore bringing down rates! And if rents are really 2x mortgage payments, then there should be tons of people lining up to do so, since it's basically just free money lying around. The invisible hand and everything.
2.Nearly half of renters in the USA are cost burdened (https://www.census.gov/newsroom/press-releases/2024/renter-h...).
It is mental gymnastics to say that renters are saving by renting.
And about realtor fees, that sure would affect my decision to move or not. Or to rent an appartment/condo, which is almost always possible, especially in urban centers.
2. And lots of homeowners are cost-burdened too. What's your point? The US is an expensive place for everything. Mortgage rates are crazy expensive now too.
It's not mental gymnastics to say you can save by renting. There are lots of online calculators where you can see the places in the US where it's cheaper to rent than to buy.
And sometimes you have to move for a job, period. And families don't always want to rent an apartment, they want to rent a house with a backyard, you know?
2. If a homeowner has more than one property, why not sell one of the properties when you become cost burdened? Also, I think at some point you stop paying a mortgage, right? I don't think that's the case with renting.Oh and it's a neat financial tool too, a mortgage.
So yeah renters would be better off owning, other than in some niche situations.
I don't understand what brings people to move for jobs if the salary doesn't make housing trivial for them. You're saying people on a 50k salary will move cities rather than change jobs?
Edit0: and that link I sent earlier that you probably didn't open shows that renters on average pay 30% of income on housing, while owners with mortgages paid 20% and 10% without a mortgage. Renters are the in the absolute worst situation however you want to cut it.
They can, but because of realtors these 2 transactions will end up costing 12% of the cost of the house.
I've not had a job where I moved for the salary/advantages, but I imagine I would only do so if the conpensation made it so that 12% fee seemed negligeable.
https://bendyimby.com/2024/04/16/the-hearing-and-the-housing...
I wish everyone who cares about the cost of housing could go to a hearing like that. It's a huge eye opener.
Also, here's a good debunking of investors being some kind of root cause rather than a symptom of housing that is scarce: https://www.theatlantic.com/ideas/archive/2023/01/housing-cr...
Climate change isn’t going to be stopped. Don’t get tied to some dirt that’ll be inhospitable before too long. And houses are generally full of obsolete crap anyway, like bad electric wiring, rooms without ethernet, and big empty rooms that need to be inefficiently climate controlled.
Tech folks should really lead the way on this. If you are remote and have a high wage, why don’t you live in some futuristic RV off in some idyllic countryside?
I’d definitely say it wasn’t ideal, the waste situation was certainly not great without a septic tank hook-up! But it is a something that can be iterated on. NIMBYs, on the other hand, there just isn’t any traction there at all.
Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
And that number could get smaller, amid signs that large institutional investors are scaling back home purchases.
Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought, according to data from Parcl Labs."
If 28% of sellers that quarter were investors then the owner occupancy rate went up.
Now I suspect that’s not the case but if you look at home ownership rates for non-investors they stay in a very tight couple of % points in the mid 60s and they track interest rates. This has been true since the US started making home ownership a governmental priority post ww2.
Prior to that it was in the 40s for as far back as I could find any data.
The implication is that this drives up the price for renters, because the demand side includes not just money from people seeking a place to live, but much larger amounts of money from other markets.
The implication of these article is always that investors are somehow unfairly competing against homeowners. But there is only one fixed pool of people competing for housing - something that reduces supply for buyers is increasing it for tenants and vice versa.
There's a fixed pool of ppl who need housing (aka the entire population of the country) and a relatively fixed pool of interior floorspace to divvy up among them.
Whether each person chooses to/prefers to/is forced to rent or buy is not the driving force behind rent and price changes
Rents & prices are moving because the amount of floorspace that exists (in places people want to live) is much lower than the aggregate amt of floorspace people would like there to be. Each month, everyone who needs to buy/sell/rent is forced to play a game of musical chairs. If you don't have a lot of $, you are going to be one of the people w/no chair, and be forced to leave.
In any normal market this would trigger vast increases of floorspace (or chair) manufacturing, but in the anglosphere we have convinced ourselves that there is only one true way to live - in a square box with a triangle on top - and we forbid almost every other form on most land, making it extremely difficult to increase the # of chairs.
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> Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%.
> Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
> ...
> Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought ...
SO - how many of those mom-and-pop investors are mostly buying homes as investments? Vs. how many are building a well-to-do lifestyle, with a "cabin on the lake up north", and "winter condo in Florida"? (Or buying homes for their less-well-to-do children, maybe with some inheritance tax dodges baked in?)
EDIT: The issue with "investor" is here:
> Nearly 27% of all homes sold in the first three months of the year were bought by investors -- the highest share in at least five years, according to a report by real estate data provider BatchData.
How much does BatchData actually know about the finances and lifestyles of the "mom-and-pop" buyers which it has labeled as "investors"? (Vs. "developers", or "fixer-uppers", or multi-home lifestylers, vs. ...)
I don't think we can tell.
*inner Minnesotan twitching*
Not a shocker, given high interest rates usually drive down prices, and investors are not getting mortgages. Great investment to keep value, not so much for growth.
I don’t know of any real estate investor who doesn’t use mortgages. The norm is interest-only mortgages and not paying down principal at all.
But anyway, the trend of corparations buying houses is really bad.
> Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said.
> And that number could get smaller, amid signs that large institutional investors are scaling back home purchases.
Do a google search for "rent-fixing algorithms".
If you own enough homes in a rental market, you can determine the market rate. An empty house has value simply by depleting local housing stock, since it is giving you greater leverage to drive market rate up.
Of course its less value than actually having it rented, but its still value. Tax code will also allow for softening the loss.
Only if the government has managed to prevent new construction.
Consider this: You aim to buy all 100 units, and then you can charge whatever rent you like, right? What happens is sellers discover you are doing this, and then raise their asking prices through the roof. The result is it costs you so much to get that monopoly that you cannot hope to be able to rent at a profit. Especially if it is possible to create new units for the purpose of selling at a high price to you. And it is possible, unless the government prevents new construction.
You cannot attain a monopoly unless there are major barriers to entry. In this case, it is government zoning that prevents new construction. In California, anyone can sue to block any new housing construction, bringing the construction market to a standstill and hence the highest home prices in the nation.
Don’t look down.
It’s also why the current admin seems really intent on bullying Powell into decreasing the fed rate - Trump and many of his friends are very exposed to real estate.
If rents are not allowed to rise, the landlord risks locking in a low rent for the indeterminate future. It's a better play to leave it vacant until the rents rise.
Rent control is simply a disaster.