3 ms·

Blackrock is buying homes to rent, right? If 90% of home buyers can afford $x per month, sure higher interest rates mean that the $x will have to include more

by sliken 5y ago

Blackrock is buying homes to rent, right? If 90% of home buyers can afford $x per month, sure higher interest rates mean that the $x will have to include more interest, and the home prices drop. However, that only matters if you sell a house. If you are buying houses to decrease housing supply, and increase the rental prices you shouldn't care about the interest rates.

recursivedoubts 5y ago
So waiting a year and a half, buying in at a much lower price and then earning a much larger ongoing return on capital would be the smart play. You are arguing that Blackrock is stupid. Which is fine, but I don't believe that.
- xapata 5y ago
  They're probably buying on credit, so their purchase price doesn't really change if rising interest rates are the cause of the price drop.
  - recursivedoubts 5y ago
    Only if the rise in interest rates is offset by the price drop. With interest rates so low, that's almost certainly not the case: home prices will crater. End of the day, home cost matters and blackrock isn't stupid. They are paying a 20% premium over today's insane market. Think about that. They either expect hyperinflation and/or low rates forever or they are being told to buy the homes.
    - xapata 5y ago
      Another option is that Black rock believes the government, when push comes to shove, won't let housing prices fall dramatically, since a large portion of the electorate has nearly all their net worth tied up in their homes.
      - recursivedoubts 5y ago
        You are now arguing that Blackrock knows something we don't know. Which is fine, and I think there is a good chance that's true.
        xapata 5y ago
        Knows vs believes. For an investor, belief with an estimation of confidence is sufficient. There's never really a "knows for sure" even with insider trading. For what it's worth, I'm of the same belief. I think it's politically infeasible to allow house prices to decrease significantly throughout the whole United States.

by sliken 5y ago

recursivedoubts 5y ago

So waiting a year and a half, buying in at a much lower price and then earning a much larger ongoing return on capital would be the smart play. You are arguing that Blackrock is stupid. Which is fine, but I don't believe that.

xapata 5y ago
They're probably buying on credit, so their purchase price doesn't really change if rising interest rates are the cause of the price drop.
- recursivedoubts 5y ago
  Only if the rise in interest rates is offset by the price drop. With interest rates so low, that's almost certainly not the case: home prices will crater. End of the day, home cost matters and blackrock isn't stupid. They are paying a 20% premium over today's insane market. Think about that. They either expect hyperinflation and/or low rates forever or they are being told to buy the homes.
  - xapata 5y ago
    Another option is that Black rock believes the government, when push comes to shove, won't let housing prices fall dramatically, since a large portion of the electorate has nearly all their net worth tied up in their homes.
    - recursivedoubts 5y ago
      You are now arguing that Blackrock knows something we don't know. Which is fine, and I think there is a good chance that's true.
      - xapata 5y ago
        Knows vs believes. For an investor, belief with an estimation of confidence is sufficient. There's never really a "knows for sure" even with insider trading. For what it's worth, I'm of the same belief. I think it's politically infeasible to allow house prices to decrease significantly throughout the whole United States.