Investors ‘Storm’ US Housing Market, Buy 90,000 Homes In Three Months
As US home prices ascended into the stratosphere amid a confluence of pandemic dynamics all turbocharged by Fed largesse, I suggested it was implausible to assume everyday people would keep buying half-million dollar houses.
That assessment wasn't based on any affordability index or, really, on anything at all other than common sense, which seems to dictate that the "median" American doesn't buy things that cost $500,000, regardless of how favorable financing conditions might be.
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At some point, something is going to have to give. Ideally, it should be zoning regulations. A plan B is internal migration not even to Austin or Atlanta but to Kansas City, Louisville, St Louis, Cincinnati, Oklahoma City etc.
If only banks would consider a perfect rent payment history instead of DTI ratios
After all, renters are paying the mortgage… just not their own.
I’m not sure why the purchase of single family housing by institutional investors (whether “iBuyers” like Opendoor or Zillow looking to renovate and sell or income investors like Blackstone, BlackRock and Invitation Homes looking to amass large rental portfolios) has not yet fallen into the crosshairs of politicians like Elizabeth Warren and AOC. This investor appetite has clearly driven up home prices and contributed to affordability issues particularly for entry level home buyers and relatively lower income home buyers.
H-Man, the current residential market is beginning to smell more and more like 2006. There has been an explosion of apartment construction which will be competing with those residential units. Methinks the next phase will be converting those apartments to condos.
A large pool of single family homes are not as conducive to being owned by a corporation as large apartment buildings.
The rental process, management of real estate taxes and inside maintenance (different plumbing, heating, cooling, electric systems in every house) and variable outside maintenance (siding, sidewalks, roofs, windows) is going to be far more inefficient and costly than the corporation’s estimates.
This won’t work in the longer term, is my guess.
One man’s opinion-Cycles have not been repealed. We’ve had a 40 year plus interest rate rally. We’ve had a suppression of household formation. Our national debt has grown quite a bit, but low interest rates increased spending and the expansion of the balance sheet haven’t reached critical mass. There is is also massive damage beginning from climate change and modern agriculture. Could we go froma virtuous appearing cycle to a vicious one? Sure… What I haven’t seen in 2021 is what I and many others saw clearly in 2019: Inverted yield curve, sharp disruption of the overnight lending markeets, big news from the elliott wave crowd, etc….Did this predict the pandemic? Maybe.. But sentries at the outer ranges of the empire have their ear to the ground….stock market total value/GDP over 231%. Anumber of big bulls selling. etc. Time horizon unknown. In 1987, a lot of equity money fled for residential real estate, In 1992, they gave it all back and then some. We have an unresolved pricing adujustment decision for commerical real estate, particularly stores and office space. We could have one heck of a crackup in the next five or so years in the financial markets while we also experience a large generational sea change. Meanwhile, we need a much better understanding of what the GFC and pandemic bailouts have wrought….
Just in time for Christmas, we’re watching the nation’s housing turn into Potter’s field.
As this article points out – there are a lot of factors influencing house prices. One thing I have observed is the longer run cycles in housing. We just got about 5 years worth of appreciation in the last 12 months. But prior to that, after the housing market crash in 08-09 we had very slow price appreciation for the most part. And demographics suggest that we are in a buying cycle as the millenial generation reach the age where they start families and buy houses. We are pretty much in that demographic peak. So what next? If I had to guess I would say we could see 4-7 years of slow growth starting next year. No crash. Just very slow growth in prices. That will reset income to cost ratio for buying a house. And incomes will likely grow faster than house prices very soon. Local markets that have run up too fast may see some correction but nationwide a significant bust is unlikely unless you get a severe recession.