> The new paradigm: A house’s value is now the maximum amount of annual rental income that can be extracted from it by a global investor, multiplied by maximal

> The new paradigm: A house’s value is now the maximum amount of annual rental income that can be extracted from it by a global investor, multiplied by maximal institutional leverage. This is generally the same thing from the other point of view? Let’s put aside conversion of housing units to vacation stays. That’s a separate issue roiling some housing markets (and not others — some states have already dealt with the Airbnb problem) Then, what you’re left with is that when a house goes on the market either a family buys it and pays mortgage however much they can afford or an investor buys it and… rents it to that family however much the family can afford. The investor is screwed if rent doesn’t cover mortgage, especially if they are over leveraged. Over time the math works out that the monthly costs of renting and owning are similar. Typically if it seems out of wack, it’s either because there’s a bubble and prices will crash or there’s a boom in the economy and rent is about to join home prices in the stratosphere. The real difference between rent/buy now vs then is the difficulty affording a down payment in a low interest rate environment when asset values are bloated, and risk of being underwater if interests rates ever rise significantly.