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Home prices and rents are up because of low interest rates and nimbys who block new construction. Corporations buying homes have literally nothing to do with it

Home prices and rents are up because of low interest rates and nimbys who block new construction. Corporations buying homes have literally nothing to do with it. If they buy homes to flip they have no net impact on home prices (because they buy and sell in equal quantities). If they buy homes to rent out they exert downward pressure on rents, so they are not responsible for rising rents. The reason why the government has done nothing to fix it is because 1. The median voter is a homeowner and WANTS homes to be unaffordable so their investment goes up. 2. The median non-homeowner does not understand basic supply and demand and does not understand that the lack of housing is the main driver of high home prices, so they complain about red herrings like Zillow buying up houses instead of pushing the government loosen zoning restrictions on multifamily housing. You fall into the latter category, which means YOU are part of the problem. You complain about the government not doing anything to fix the housing problem but people like you are literally the reason why it doesn't get fixed.

space_fountain 5y ago
I’m not an economist but it feels to me like more most be going on. Capital is flowing into real estate because the people investing feel that they don’t have better places to put it. The fed is struggling to get capital into the places that would lift employment, like new buildings, infrastructure, new business formation, and instead a lot of that money is going to bid things up
- esoterica 5y ago
  That just falls under interest rates. Yields are down in every asset class because of the low rate environment.
- PaulDavisThe1st 5y ago
  I still am not seeing enough commentary about how we are currently at more-or-less peak Boomer retirement. There are a metric shit-ton(ne) of people who owned a "family home" for long enough to own it outright, have the seen the price climb, and are selling out and moving on. But Paul Davis, First of His Name, you cry, that means someone is still buying those ex-Boomer family homes! Why yes, yes it does. But those retiring boomers, in great numbers and armed with (relative) boatloads of cash, are moving to places that they would not have settled in before reaching this stage of life. 20-30 years ago, their money would have sloshed around inside the places they already lived, as they perhaps needed 1 more or 1 less bedroom. [0] But now, they are on the move. Bend, Santa Fe, Bellingham, Ithaca ... many, many communities seeing huge influxes of cash buyers that would not have happened before. I'm sure there are many other forces at work in today's crazy residential real estate market, some of them possibly larger/more important. But I think that this time period, right in the middle of the Boomer retirement wave, is also affected by this too. Disclaimer: I resemble the above remarks. [0] EDIT: also, as noted by others here, some of the buyers of those homes are not in any way "other people buying family homes" but investment/financial service corporations.
unethical_ban 5y ago
Personal attacks and accusations of ignorance are not welcome here. The average renter doesn't understand supply and demand? Really? Zillow isn't the only big buyer of homes, and not all buyers are doing it to flip. The problem is renting in general. I would welcome regulations that bar any institution or individual from owning more than a handful of rental properties, and some kind of incentive for mortgage lenders to de-emphasize down-payments in lending. Hell, I'd like to hear a great debate on the ethics of renting-without-equity, period. Perhaps all residential units should offer equity in the living space over time, even apartments. Eliminate the renter class altogether by bringing everyone into the ownership class.
- esoterica 5y ago
  > The average renter doesn't understand supply and demand? You don't understand that making operating rentals harder and more expensive will cause rents to go up. So yes, there is a very large group of people who don't understand supply and demand and you are part of that group. > Hell, I'd like to hear a great debate on the ethics of renting-without-equity, period. If you force people to receive $500 in equity for every moment they rent, then rents will go up by $500 / month. This is bad for the people who cannot afford to pay that $500, or for people who would rather invest that $500 in the stock market or whatever. If you wave the regulatory wand and demand that X must happen, then what you are really demanding is that everyone must pay for X, whether or not they want to. Not that everybody will magically get X for free.
  - Marsymars 5y ago
    > If you force people to receive $500 in equity for every moment they rent, then rents will go up by $500 / month. There are options other than forcing people to receive equity. e.g. A public-ownership rental option: https://www.theatlantic.com/ideas/archive/2021/03/why-its-better-to-rent-than-to-own/618254/ https://www.theatlantic.com/ideas/archive/2021/03/why-its-be...
- sokoloff 5y ago
  > The average renter doesn't understand supply and demand? Given the quality of debate and/or fantastical thinking that I see in a lot of online forums, I'd be forced to wager that a pretty wide swath of people who debate rent (or other economic) topics online appear to not understand supply and demand. Whether or not renters on average do or do not, I can't say.
silisili 5y ago
Speak for yourself, please. I sold my home in 2019. At the time there was already a frenzy, multiple bidders, buying on day one. Just like today. The guy who bought my house went 30% over asking. I wasn't willing to be rushed, so just sold and didn't buy. I'm in no hurry to buy - I've been enjoying traveling the country. But I don't enjoy the gouging I've been taking on rent, admittedly. Secondly, there are no zoning problems where I live. The problem is exactly Blackrock buying tens of homes per week. That and migration. A progressive property tax, or other limits on investment homes would alleviate the problems I've seen firsthand.
- esoterica 5y ago
  > I sold my home in 2019. At the time there was already a frenzy, multiple bidders, buying on day one. Just like today. The guy who bought my house went 30% over asking. I wasn't willing to be rushed, so just sold and didn't buy. Cool story, but what does that have to do the root causes of rising home prices? What exactly are you trying to argue here? > or other limits on investment homes Limits on investment homes makes renting more expensive, the same way limiting the production of cars would make cars more expensive. You are literally advocating shifting the supply curve further to the right. Every post you make further proves my point about people not understanding basic supply and demand.
  - silisili 5y ago
    Why is this so hard to understand? Let's try a small example. In a city there are ten houses. Five are vacant, let's call them new construction. Five people are moving to the area. Everything sounds good, right? Blackrock buys 3 of the homes. Now 5 people have to fight over 2 houses. This drives housing price up as they bid with each other. The remaining 3 losers are forced to rent. Blackrock can now charge more money because a) house prices went up, and b) there are no other places to live. To be clear, this is talking about what's happening in -my- area. And based off your Nimbyism comments, I can assure you that it's not the same as your area.
    - throwaway6734 5y ago
ljm 5y ago
The person who doesn't own a home is hardly at fault for being frustrated that the prices of homes are increasing to an absurd degree. In fact, that sounds like misplaced blame when in the exact same post you mention these things: 1. The median voter is a homeowner 2. The homeowner wants the price of their house to increase 3. Therefore it is in their interest to keep housing unaffordable 4. Therefore they continue voting for the people who facilitate it, and don't vote for the people who want to change it. 5. All because their house is not a home, but an investment In your mind, a person who is fed up of being priced out of a place to live is part of the problem? It doesn't stack up.
- bumby 5y ago
  >All because their house is not a home, but an investment At least in the US, home equity is the largest single asset class for most people.[1] I agree with most is what you said, but it seems fairly predictable that people would try to protect the biggest egg inn their nest. Whether or not it’s good policy to combine supporting that is another matter. [1] https://www.census.gov/library/stories/2020/11/gaps-in-wealth-of-americans-by-household-type-in-2017.html https://www.census.gov/library/stories/2020/11/gaps-in-wealt...
- goldcd 5y ago
  I think #2 is wht needs to be addressed. If you're just happily living in a house you own, it's nice that the theoretical price is going up, but it's of limited actual benefit to you. It only has a real impact when you sell - and only has a benefit if the house you want to buy has appreciated less than the one you're selling to pay for it. Houses falling in value is bad - people are trapped where they are by negative equity, which creates inefficiencies (can't move to a better paying job, as can't sell the house you're in). The only thing I think is universally bad about house prices rising (along with low interest rates) is that it allows people to re-mortgage their homes (or choose not to pay down capital), to buy another home to rent as an investment (either directly, or through an investment). This creates a feedback loop, creating a class of owners and trapped renters. I'd have thought the solution here would be a healthy dose of taxation on rental income.
ldbooth 5y ago
I think Blackrock and other asset owners buy the houses and rent them out through management companies. Thru which they can materially impact rent costs in a given area.
jim-jim-jim 5y ago
Imagine being on a sinking life raft, pointing out where the hole is, and then getting told "it's okay, we just need more buckets to bail the water." The whole world isn't San Francisco. Where I live in Australia, there is no physical lack of roofs to house everybody who wants one. Our "shortage" is entirely political and can be legislated away overnight if the will were there. The problem is and always has been rooted in the words "investment property."
- taneq 5y ago
  Yeah, every measure brought in here to ostensibly “make housing more affordable” has, surprise surprise, done the exact opposite. Its almost like the people introducing these measures all own a lot of investment properties.
- jlawer 5y ago
  I agree the cause can be made to go away overnight. However the impact of doing the wrong thing could be disastrous. In Australia we have a housing bubble, but the problem is woven very deep. Our tax system favours property investments. Our top tax rate (45%) kicks in at extremely low levels of income compared to globally ($180,000 AUD which is around $135,000 USD). The system provides all kinds of tax deductions to investment property owners, and ways of making paper losses to offset income tax. Much of our economic activity is banking, retail and construction. Much of which is fuelled by the churn in property with ever increasing prices. This economic cycle kept Australia out of recession until Covid hit. Now that the average house is over $500,000 AUD, we have large swaths of the younger population leveraged to their eyeballs in debt at a 2% interest rate. If housing prices fall or interest rates rise there will be a collapse, and a good chance of an extended recession we have avoided. The best case is they slowly the market down, we have a moderate rate of inflation which allows the real value of houses to drop. At the same time reduce the tax benefits to property investment. Unfortunately this won't happen. The political class knows that the median voter is a home owner, and its in their interests for housing prices to keep rising. They are just hoping that it can keep going until after they are finished. Totally not jaded about not being able to afford a house in my late 30s due to being wiped out in the 2008 GFC and then starting a family.
naasking 5y ago
> Home prices and rents are up because of low interest rates and nimbys who block new construction. Corporations buying homes have literally nothing to do with it. TIL that pouring a truckload of gasoline on a brushfire has nothing to do with why the forest is currently burning out of control.
- rsj_hn 5y ago
  TIL that the ownership structure of an asset purchaser is responsible for controlling asset prices rather than fundamentals like interest rates and rates of return. I guess Blackrock is responsible for high stock prices, too.

space_fountain 5y ago

I’m not an economist but it feels to me like more most be going on. Capital is flowing into real estate because the people investing feel that they don’t have better places to put it. The fed is struggling to get capital into the places that would lift employment, like new buildings, infrastructure, new business formation, and instead a lot of that money is going to bid things up

esoterica 5y ago
That just falls under interest rates. Yields are down in every asset class because of the low rate environment.
PaulDavisThe1st 5y ago
I still am not seeing enough commentary about how we are currently at more-or-less peak Boomer retirement. There are a metric shit-ton(ne) of people who owned a "family home" for long enough to own it outright, have the seen the price climb, and are selling out and moving on. But Paul Davis, First of His Name, you cry, that means someone is still buying those ex-Boomer family homes! Why yes, yes it does. But those retiring boomers, in great numbers and armed with (relative) boatloads of cash, are moving to places that they would not have settled in before reaching this stage of life. 20-30 years ago, their money would have sloshed around inside the places they already lived, as they perhaps needed 1 more or 1 less bedroom. [0] But now, they are on the move. Bend, Santa Fe, Bellingham, Ithaca ... many, many communities seeing huge influxes of cash buyers that would not have happened before. I'm sure there are many other forces at work in today's crazy residential real estate market, some of them possibly larger/more important. But I think that this time period, right in the middle of the Boomer retirement wave, is also affected by this too. Disclaimer: I resemble the above remarks. [0] EDIT: also, as noted by others here, some of the buyers of those homes are not in any way "other people buying family homes" but investment/financial service corporations.

unethical_ban 5y ago

Personal attacks and accusations of ignorance are not welcome here. The average renter doesn't understand supply and demand? Really? Zillow isn't the only big buyer of homes, and not all buyers are doing it to flip. The problem is renting in general. I would welcome regulations that bar any institution or individual from owning more than a handful of rental properties, and some kind of incentive for mortgage lenders to de-emphasize down-payments in lending. Hell, I'd like to hear a great debate on the ethics of renting-without-equity, period. Perhaps all residential units should offer equity in the living space over time, even apartments. Eliminate the renter class altogether by bringing everyone into the ownership class.

esoterica 5y ago
> The average renter doesn't understand supply and demand? You don't understand that making operating rentals harder and more expensive will cause rents to go up. So yes, there is a very large group of people who don't understand supply and demand and you are part of that group. > Hell, I'd like to hear a great debate on the ethics of renting-without-equity, period. If you force people to receive $500 in equity for every moment they rent, then rents will go up by $500 / month. This is bad for the people who cannot afford to pay that $500, or for people who would rather invest that $500 in the stock market or whatever. If you wave the regulatory wand and demand that X must happen, then what you are really demanding is that everyone must pay for X, whether or not they want to. Not that everybody will magically get X for free.
- Marsymars 5y ago
  > If you force people to receive $500 in equity for every moment they rent, then rents will go up by $500 / month. There are options other than forcing people to receive equity. e.g. A public-ownership rental option: https://www.theatlantic.com/ideas/archive/2021/03/why-its-better-to-rent-than-to-own/618254/ https://www.theatlantic.com/ideas/archive/2021/03/why-its-be...
sokoloff 5y ago
> The average renter doesn't understand supply and demand? Given the quality of debate and/or fantastical thinking that I see in a lot of online forums, I'd be forced to wager that a pretty wide swath of people who debate rent (or other economic) topics online appear to not understand supply and demand. Whether or not renters on average do or do not, I can't say.

silisili 5y ago

Speak for yourself, please. I sold my home in 2019. At the time there was already a frenzy, multiple bidders, buying on day one. Just like today. The guy who bought my house went 30% over asking. I wasn't willing to be rushed, so just sold and didn't buy. I'm in no hurry to buy - I've been enjoying traveling the country. But I don't enjoy the gouging I've been taking on rent, admittedly. Secondly, there are no zoning problems where I live. The problem is exactly Blackrock buying tens of homes per week. That and migration. A progressive property tax, or other limits on investment homes would alleviate the problems I've seen firsthand.

esoterica 5y ago
> I sold my home in 2019. At the time there was already a frenzy, multiple bidders, buying on day one. Just like today. The guy who bought my house went 30% over asking. I wasn't willing to be rushed, so just sold and didn't buy. Cool story, but what does that have to do the root causes of rising home prices? What exactly are you trying to argue here? > or other limits on investment homes Limits on investment homes makes renting more expensive, the same way limiting the production of cars would make cars more expensive. You are literally advocating shifting the supply curve further to the right. Every post you make further proves my point about people not understanding basic supply and demand.
- silisili 5y ago
  Why is this so hard to understand? Let's try a small example. In a city there are ten houses. Five are vacant, let's call them new construction. Five people are moving to the area. Everything sounds good, right? Blackrock buys 3 of the homes. Now 5 people have to fight over 2 houses. This drives housing price up as they bid with each other. The remaining 3 losers are forced to rent. Blackrock can now charge more money because a) house prices went up, and b) there are no other places to live. To be clear, this is talking about what's happening in -my- area. And based off your Nimbyism comments, I can assure you that it's not the same as your area.
  - throwaway6734 5y ago

ljm 5y ago

The person who doesn't own a home is hardly at fault for being frustrated that the prices of homes are increasing to an absurd degree. In fact, that sounds like misplaced blame when in the exact same post you mention these things: 1. The median voter is a homeowner 2. The homeowner wants the price of their house to increase 3. Therefore it is in their interest to keep housing unaffordable 4. Therefore they continue voting for the people who facilitate it, and don't vote for the people who want to change it. 5. All because their house is not a home, but an investment In your mind, a person who is fed up of being priced out of a place to live is part of the problem? It doesn't stack up.

bumby 5y ago
>All because their house is not a home, but an investment At least in the US, home equity is the largest single asset class for most people.[1] I agree with most is what you said, but it seems fairly predictable that people would try to protect the biggest egg inn their nest. Whether or not it’s good policy to combine supporting that is another matter. [1] https://www.census.gov/library/stories/2020/11/gaps-in-wealth-of-americans-by-household-type-in-2017.html https://www.census.gov/library/stories/2020/11/gaps-in-wealt...
goldcd 5y ago
I think #2 is wht needs to be addressed. If you're just happily living in a house you own, it's nice that the theoretical price is going up, but it's of limited actual benefit to you. It only has a real impact when you sell - and only has a benefit if the house you want to buy has appreciated less than the one you're selling to pay for it. Houses falling in value is bad - people are trapped where they are by negative equity, which creates inefficiencies (can't move to a better paying job, as can't sell the house you're in). The only thing I think is universally bad about house prices rising (along with low interest rates) is that it allows people to re-mortgage their homes (or choose not to pay down capital), to buy another home to rent as an investment (either directly, or through an investment). This creates a feedback loop, creating a class of owners and trapped renters. I'd have thought the solution here would be a healthy dose of taxation on rental income.

ldbooth 5y ago

I think Blackrock and other asset owners buy the houses and rent them out through management companies. Thru which they can materially impact rent costs in a given area.

jim-jim-jim 5y ago

Imagine being on a sinking life raft, pointing out where the hole is, and then getting told "it's okay, we just need more buckets to bail the water." The whole world isn't San Francisco. Where I live in Australia, there is no physical lack of roofs to house everybody who wants one. Our "shortage" is entirely political and can be legislated away overnight if the will were there. The problem is and always has been rooted in the words "investment property."

taneq 5y ago
Yeah, every measure brought in here to ostensibly “make housing more affordable” has, surprise surprise, done the exact opposite. Its almost like the people introducing these measures all own a lot of investment properties.
jlawer 5y ago
I agree the cause can be made to go away overnight. However the impact of doing the wrong thing could be disastrous. In Australia we have a housing bubble, but the problem is woven very deep. Our tax system favours property investments. Our top tax rate (45%) kicks in at extremely low levels of income compared to globally ($180,000 AUD which is around $135,000 USD). The system provides all kinds of tax deductions to investment property owners, and ways of making paper losses to offset income tax. Much of our economic activity is banking, retail and construction. Much of which is fuelled by the churn in property with ever increasing prices. This economic cycle kept Australia out of recession until Covid hit. Now that the average house is over $500,000 AUD, we have large swaths of the younger population leveraged to their eyeballs in debt at a 2% interest rate. If housing prices fall or interest rates rise there will be a collapse, and a good chance of an extended recession we have avoided. The best case is they slowly the market down, we have a moderate rate of inflation which allows the real value of houses to drop. At the same time reduce the tax benefits to property investment. Unfortunately this won't happen. The political class knows that the median voter is a home owner, and its in their interests for housing prices to keep rising. They are just hoping that it can keep going until after they are finished. Totally not jaded about not being able to afford a house in my late 30s due to being wiped out in the 2008 GFC and then starting a family.

naasking 5y ago

> Home prices and rents are up because of low interest rates and nimbys who block new construction. Corporations buying homes have literally nothing to do with it. TIL that pouring a truckload of gasoline on a brushfire has nothing to do with why the forest is currently burning out of control.

rsj_hn 5y ago
TIL that the ownership structure of an asset purchaser is responsible for controlling asset prices rather than fundamentals like interest rates and rates of return. I guess Blackrock is responsible for high stock prices, too.