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My worry is that as financing becomes more expensive, institutional demand will replace retail demand. Institutional demand will be driven by a constrained supp
by mycentstoo 4y ago
My worry is that as financing becomes more expensive, institutional demand will replace retail demand. Institutional demand will be driven by a constrained supply which will in turn drive up rent prices.
I fear a future where houses are nearly exclusively bought by institutional investors because the amount of capital needed to secure a reasonable mortgage will soar and banks in turn will view the retail buyer as too much risk because of the need to have very high income for 30 years.
- deleted 4y ago[deleted]
- whimsicalism 4y agoHigh rates also constrain institutional demand. Somehow pressuring banks to give ridiculous money to people they clearly shouldn't so they can all bid against each other is not a long term solution. In fact, it's a solution that we have seen fail numerous times.
- andrewstuart 4y agoDead right. Unless government addresses this, the future is one in which you live in a home owned by a corporation.
- mancerayder 4y agoInstitutional demand has two drivers that I know of: chasing appreciation or chasing yields. Appreciation is finished. So that leaves cap rates. How much can you keep raising rents? What are vacancy rates going to be? Maintenance costs? At a certain point something like a bond is less hassle and risk. I don't know what percentage of these institutional rentals are intended to be held forever, or in long term funds, etc. versus part of a trade like other assets when financial conditions like debt costs change.