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Thu Jun 10, 2021, 08:18 AM

If You Sell a House These Days, the Buyer Might Be a Pension Fund

https://www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-a-pension-fund-11617544801?redirect=amp#click=https://t.co/uTagTOQQgI

D.R. Horton Inc. built 124 houses in Conroe, Texas, rented them out and then put the whole community, Amber Pines at Fosters Ridge, on the block. A Who’s Who of investors and home-rental firms flocked to the December sale. The winning $32 million bid came from an online property-investing platform, Fundrise LLC, which manages more than $1 billion on behalf of about 150,000 individuals.

The country’s most prolific home builder booked roughly twice what it typically makes selling houses to the middle class—an encouraging debut in the business of selling entire neighborhoods to investors.

"You now have permanent capital competing with a young couple trying to buy a house,” said John Burns, whose eponymous real estate consulting firm estimates that in many of the nation’s top markets, roughly one in every five houses sold is bought by someone who never moves in. “That’s going to make U.S. housing permanently more expensive,” he said.

“Limited housing supply, low rates, a global reach for yield, and what we’re calling the institutionalization of real-estate investors has set the stage for another speculative investor-driven home price bubble,” the firm concluded.


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Response to sinkingfeeling (Original post)

Thu Jun 10, 2021, 08:25 AM

1. When the ROI on real estate exceeds the return from equities (stocks)....

where does anybody think the smart money is going to go? Of course, they're snapping them up like dragonflies after skeeters.

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Response to lastlib (Reply #1)

Thu Jun 10, 2021, 09:24 AM

4. Smart money is smart - if they sell on time at a profit

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Response to sinkingfeeling (Original post)

Thu Jun 10, 2021, 08:34 AM

2. So long mom and pop landlords, hello corporate slumlords.

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Response to Beastly Boy (Reply #2)

Fri Jun 11, 2021, 11:52 AM

10. I'm greatly reassured by the big-heartedness of vulture capitalists

I'm confident that they will be very responsive to tenant complaints, will address shortcomings quickly and efficiently, won't turn out tenants just for complaining about substandard properties, and will absolutely not, no-how, no-way "reform" landlord-tenant laws to greatly favor negligent and lazy landlords, and reduce tenant alternatives to take-it-or-leave-it.

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Response to sinkingfeeling (Original post)

Thu Jun 10, 2021, 08:41 AM

3. I think this is something to be viewed in the big picture

Low interest rates are very advantageous to home buyers since a good mortgage rate can really ramp up the buying power of a monthly payment.

However, those same low interest rates make traditional safe investments unappealing since the ROI is below inflation. That has sent all of the capital holding entities looking for diversity outside of the equities market that can still return some profits.

It is the pro and con of the policy.

I think on net, the low interest policy benefits the individual home buyer far more than the institutional buyers hurt them.

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Response to genxlib (Reply #3)

Thu Jun 10, 2021, 09:42 AM

5. Not in the real world

The ability of the investors to outbid the individual home buyer negates any effect of interest rates. I've seen too many people who can't buy homes because of the financialization of the market; not to mention people who are trying to rent also having trouble finding affordable properties.

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Response to Doc Sportello (Reply #5)

Fri Jun 11, 2021, 09:56 AM

7. This is an interesting pretty in depth article about it

https://www.vox.com/22524829/wall-street-housing-market-blackrock-bubble

It basically says (with lots of data) that institutional investors are players in the market but the numbers are so small that they really aren't impacting the price.

They pin price increases (ownership and rent) on limited housing supply in the face of restrictions on new building. I am in the engineering field and can attest that it is getting much more costly to develop. Land costs have gone way up and concurrency rules have forced the developers to pay for many more of the impacts that new development bring. Combined with environmental and zoning restrictions, it has made it more costly to develop new single family homes. New units have not kept up with increased demand so it makes the existing housing more valuable across the board.

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Response to genxlib (Reply #7)

Fri Jun 11, 2021, 11:44 AM

9. They go into specific markets and the results are nightmarish

See DFW area for reference.

They price people out of purchasing, or renting.

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Response to sinkingfeeling (Original post)

Thu Jun 10, 2021, 09:46 AM

6. We have a housing crisis in this country

It's not just homelessness. Individual house buyers can't keep up with the investors and rents are also rising, pricing renters out. Trying to make it about the "free" market or interest rates misses the point. Affordable housing should be a right, just like health care.

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Response to sinkingfeeling (Original post)

Fri Jun 11, 2021, 11:30 AM

8. And how about the almost free money for mortgages If many among

the Republican base couldn't still manage to buy into the American dream in spite of falling wages coupled with almost constant housing price inflation, I suspect the party would already have imploded. And of course, many of the tens of millions of nonvoters on our side wouldn't be quite so unengaged either.

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