5 ms·

Is this a consequence of demand, or is this a consequence of private equity buying up rental units and manipulating pricing?

sparrish 5y ago
I got a feeling it's because of the increased risk due to the eviction moratorium.
Gigachad 5y ago
Everyone has their own opinions on how important each factor is.
chumich1 5y ago
What’s the difference?
pmorici 5y ago
Demand and lack of new supply. After the housing bubble in 2008 there was a major contraction of new home construction. It has been slowly recovering ever since but is still off the highs by quite a bit. So the combination of very low rates of new construction for nearly a decade and a current rate of new construction that is still depressed. The notion that private equity is some how manipulating home prices independent of true supply and demand dynamics is largely a lie being told by people who’s politics fit well with that narrative. https://fred.stlouisfed.org/series/HOUST https://fred.stlouisfed.org/series/HOUST
- acomjean 5y ago
  I would say private equity entering the single family home market is a factor in addition to the lack of supply. They’re not manipulating prices but they’re in the market now watching the mls (listing services) and can make an all cash offer quite quickly. https://www.washingtonpost.com/business/interactive/2021/investors-rental-foreclosure/ https://www.washingtonpost.com/business/interactive/2021/inv...
  - jeffbee 5y ago
    PE enters markets only when there is a lack of supply. Don't take my word for it. Read their prospectuses. They are completely upfront about entering markets only when the local government has constructed impenetrable barriers to entry.
    - acomjean 5y ago
      Of course, they go where they can make a good return. But they’re new to this market and increase the demand side of things. They can move much faster than individual home buyers. Real estate is constrained by regulations and it does get I the way of supply. I’m pretty sure My building couldn’t be built in our “historic district” today
  - pmorici 5y ago
    Wether a corporation owns the home and rents it out or the home is owner occupied their is still someone living there. That doesn’t effect the supply demand dynamics. Those families have to live somewhere. It may seem vaguely unfair that they have a possible advantage being an all cash buyer but that isn’t what is driving up prices. If they were buying places and not renting them that would be a different story but that isn’t what is going on here.
- asdff 5y ago
  Why were new construction rates depressed? It seems bad for the structure of our housing economy that we've had such a bull run in real estate over the past decade and the supply couldn't catch up and profit off of it. Too little too late shouldn't have been possible according to free market theory, but here we are with far too little much too late. I wonder what failed? Zoning changes in the last 10 years? CEQA and similar abuses becoming more prolific?
  - pmorici 5y ago
    The crash drove home builders to bankruptcy and construction isn’t generally a trade to can just get into without some training and experience. I’m sure government over regulation doesn’t help but outside markets like SanFrancisco where they are hostile to new development I doubt it is a primary factor in prices.
asdfasgasdgasdg 5y ago
There is no solid evidence of the private equity hypothesis, and ample evidence of underbuilding and increased demand in certain urban centers. So, absent some injection of new information, I think we have to favor the basic economics explanation of this phenomenon.

sparrish 5y ago

I got a feeling it's because of the increased risk due to the eviction moratorium.

Gigachad 5y ago

Everyone has their own opinions on how important each factor is.

chumich1 5y ago

What’s the difference?

pmorici 5y ago

Demand and lack of new supply. After the housing bubble in 2008 there was a major contraction of new home construction. It has been slowly recovering ever since but is still off the highs by quite a bit. So the combination of very low rates of new construction for nearly a decade and a current rate of new construction that is still depressed. The notion that private equity is some how manipulating home prices independent of true supply and demand dynamics is largely a lie being told by people who’s politics fit well with that narrative. https://fred.stlouisfed.org/series/HOUST https://fred.stlouisfed.org/series/HOUST

acomjean 5y ago
I would say private equity entering the single family home market is a factor in addition to the lack of supply. They’re not manipulating prices but they’re in the market now watching the mls (listing services) and can make an all cash offer quite quickly. https://www.washingtonpost.com/business/interactive/2021/investors-rental-foreclosure/ https://www.washingtonpost.com/business/interactive/2021/inv...
- jeffbee 5y ago
  PE enters markets only when there is a lack of supply. Don't take my word for it. Read their prospectuses. They are completely upfront about entering markets only when the local government has constructed impenetrable barriers to entry.
  - acomjean 5y ago
    Of course, they go where they can make a good return. But they’re new to this market and increase the demand side of things. They can move much faster than individual home buyers. Real estate is constrained by regulations and it does get I the way of supply. I’m pretty sure My building couldn’t be built in our “historic district” today
- pmorici 5y ago
  Wether a corporation owns the home and rents it out or the home is owner occupied their is still someone living there. That doesn’t effect the supply demand dynamics. Those families have to live somewhere. It may seem vaguely unfair that they have a possible advantage being an all cash buyer but that isn’t what is driving up prices. If they were buying places and not renting them that would be a different story but that isn’t what is going on here.
asdff 5y ago
Why were new construction rates depressed? It seems bad for the structure of our housing economy that we've had such a bull run in real estate over the past decade and the supply couldn't catch up and profit off of it. Too little too late shouldn't have been possible according to free market theory, but here we are with far too little much too late. I wonder what failed? Zoning changes in the last 10 years? CEQA and similar abuses becoming more prolific?
- pmorici 5y ago
  The crash drove home builders to bankruptcy and construction isn’t generally a trade to can just get into without some training and experience. I’m sure government over regulation doesn’t help but outside markets like SanFrancisco where they are hostile to new development I doubt it is a primary factor in prices.

asdfasgasdgasdg 5y ago

There is no solid evidence of the private equity hypothesis, and ample evidence of underbuilding and increased demand in certain urban centers. So, absent some injection of new information, I think we have to favor the basic economics explanation of this phenomenon.