5 ms·
It doesn't help that corporations buy all these houses up at full price and well above listing just so they can use it as rental income.
by avelis 4y ago
It doesn't help that corporations buy all these houses up at full price and well above listing just so they can use it as rental income.
- vkou 4y agoListing price is a red herring. Nobody selling a home actually expects to only get listing price for it.
- cortesoft 4y agoIf they are renting the house out, that means it isn’t being removed from the housing supply. Why would this distort the market?
- raziel2701 4y agoIf a house is being rented it means I can't buy it, supply is low. That's what I understood housing supply meant when talking about house prices. Renting is not a factor, it's another market.
- cortesoft 4y agoRenting is not an entirely separate market... renting is an alternative to buying, and their markets are linked. "Housing" is the market, and renting and buying are two options for people in the market.
- deleted 4y ago[deleted]
- seoaeu 4y agoEven assuming the markets were separate, if corporations were buying up tons of housing stock and flooding the rental market with it... shouldn't rents be going down?
- AussieWog93 4y agoNot sure if it's different in the US, but in Australia rental incomes for residential property are a tiny percentage of the value of the investment and most of the money is made through leveraged capital gains. For example, I pay $24k a year on a house worth around $1.4m. This gives a return of around 1.7%, which is nothing compared to cap notes (5%) or dividends (~4%). However, someone buying our house would only need to put down 20% up front, and could reasonably expect to see the price raise by 5-10% a year if trends continue. So that $280k deposit could theoretically return $500k+ over the course of 5 years because of the high leverage. The rental return over that period would only be $120k - not even enough to cover the interest repayments on the loan. Of course, that's assuming trends continue. If prices started falling by 5-10% per year, that $280k deposit would turn into a $500k+ loss and the investors would be absolutely fucked.
- _carbyau_ 4y agoI agree with you but to add another point, if house prices were to decrease significantly then loan margins would kick in for homeowners too. And with low interest rates, low wages(vs house price) for so long the margins for that are tight for a lot of (silly?) people who borrowed "as much as they could". It seems like: - house prices up, investors win. - house prices down, homeowners lose. It will be interesting to see how it plays out but at this stage either side of political argybargy are doing SweetFA and advertise policies to do more of the same.
- AussieWog93 4y agoTheoretically, the market going up or down shouldn't make any difference at all to most owner-occupiers. If they hold onto the house, short-term fluctuations don't affect the eventual sale price. If they buy a new property in a similar market after selling the old one, then the "losses" on the old house are made up for by the "savings" on the new property. It's only people who downsize or leave the property market altogether that would be affected by a short-term dip. (The caveat being, of course, that this completely handwaves away human psychology! Being "underwater" on the mortgage would definitely make a lot of people stressed and anxious.)
- matchbok 4y agoThose purchases are less than .5% of the market. Don't let NIMBYs think that that is the problem. We need more housing.
- aiisjustanif 4y agoWe definitely need more housing. Just not more NIMBY housing. I legit don’t need a yard.
- blueprint 4y agoso what you're saying is... you don't need more NIMBY housing in your back yard?
- donavanm 4y agoThis is absolutely not true. “Investor” properties account for about 18% of secondary home sales. 90% of those sales are to individuals with 1-4 properties. The remaining 10% of investor sales, ~2% of the total, is ALL of the professional invesotr purchases. Its billions of dollars, in a trillion dollar market.
- bezospen15 4y ago
- ianhawes 4y agoI’ve heard this but I’ve not experienced it. If corporations are buying houses and using it as rental income, they’re probably losing money. Ignoring vacation rentals, detached homes are among the hardest to rent.
- bezospen15 4y agoNewsflash, they aren't losing money
- maximus-decimus 4y agoThey probably mean losing money compared to investing in something else.
- brewdad 4y agoWell the stock market is down double digit percent this year, so maybe not?
- BeetleB 4y agoSome data would be nice. I've followed real estate investments for a while, and renting houses is fairly poor if you paid all cash for the house. The math is easy to do. Most RE investors I know who do this make good money only if they buy a significantly undervalued house - often one that is unsellable. They buy it, put in $50K to repair it, and then rent it out. Those who buy regular houses at 20% down and rent it out have a target of $200/mo net profit. Clearly, they're not buying $600K houses at $120K down to get a measly $200/mo out of it. RE investing - especially the rental market - is very nice in that it's pretty simple math and very transparent. Anyone can plug in the numbers and see what they'll get. Generally, in places where houses go for $800K, the rent will likely not even cover the loan payments. So then you play the game of taking a long term sustained loss in the hope of appreciation. But as someone else pointed out, this makes sense only if you're paying about 20% down and not with paying full cash. Buying houses with all cash is almost always a very poor investment. Random example in my area: Houses in a certain neighborhood are selling for $900K. They rent for $3.5K/mo. Assuming no costs, it would take 21 years to get the money back. Even with rent appreciation, it would take well over 10 years. Over that period, even including appreciation of the house, you're almost guaranteed to get better returns with the S&P500.
- colinmhayes 4y agoInstitutional investors are responsible for 2% of sales. This is populist nonsense. The real problem is that we slowed down build speed after 08.