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> I have no idea who is buying houses at these prices, if it's not Blackwater-type firms. US housing at 2% 15-year fixed is the biggest handout the world has e

> I have no idea who is buying houses at these prices, if it's not Blackwater-type firms. US housing at 2% 15-year fixed is the biggest handout the world has ever seen. That's why Blackrock-type firms GOBBLED up real estate. They were the first ones to back out when interest rates started going up. They're not the ones buying. I'm guessing the people who are buying are either 1) completely desperate, 2) oblivious, or 3) are willing to bet they'll have a chance to refinance at a much lower rate within a year or two and don't mind the extra carry-cost until then.

jobowoo 4y ago
How are these firms able to buy at such low rates? I thought these loans were reserved for owner-occupied homes.
- lumost 4y ago
  They don't need to use mortgage financing, they can borrow the money through other methods. One consequence of Fed Reserve rate setting in combination with a regulated mortgage market is that private equity firms can borrow at lower rates than individual borrowers. I wouldn't be surprised to learn that this dynamic has been a major contributor to housing prices rising so quickly.
  - clcaev 4y ago
    Do you mind pointing to a paper that explains this phenomena?
    - onlyrealcuzzo 4y ago
      BlackRock buys stakes in investment firms that directly purchase real estate (some specifically SFH). Those companies issue corporate debt (bonds) to buy houses. The yield they need to offer goes down when the Fed manipulates bond prices by gobbling up non-corporate debt (US Treasuries & MBS). BlackRock & other firms aren't taking on debt to invest in REITs - they're just directing more of their portofolio to REITs when The Fed drives down yields.
lamontcg 4y ago
You'll see a lot of comments in these kinds of threads by posters who say that they're just buying now and don't care since they're in it for the long term and will just ride it out. Not sure if those people are paying mostly cash or if they're just not factoring in that they may lose their jobs in ~12 months.
onlyrealcuzzo 4y ago
EDIT: Important technicality - Blackrock and other large institutions don't buy SFH directly. They do it indirectly through other funds, like REITs.

jobowoo 4y ago

How are these firms able to buy at such low rates? I thought these loans were reserved for owner-occupied homes.

lumost 4y ago
They don't need to use mortgage financing, they can borrow the money through other methods. One consequence of Fed Reserve rate setting in combination with a regulated mortgage market is that private equity firms can borrow at lower rates than individual borrowers. I wouldn't be surprised to learn that this dynamic has been a major contributor to housing prices rising so quickly.
- clcaev 4y ago
  Do you mind pointing to a paper that explains this phenomena?
  - onlyrealcuzzo 4y ago
    BlackRock buys stakes in investment firms that directly purchase real estate (some specifically SFH). Those companies issue corporate debt (bonds) to buy houses. The yield they need to offer goes down when the Fed manipulates bond prices by gobbling up non-corporate debt (US Treasuries & MBS). BlackRock & other firms aren't taking on debt to invest in REITs - they're just directing more of their portofolio to REITs when The Fed drives down yields.

lamontcg 4y ago

You'll see a lot of comments in these kinds of threads by posters who say that they're just buying now and don't care since they're in it for the long term and will just ride it out. Not sure if those people are paying mostly cash or if they're just not factoring in that they may lose their jobs in ~12 months.

onlyrealcuzzo 4y ago

EDIT: Important technicality - Blackrock and other large institutions don't buy SFH directly. They do it indirectly through other funds, like REITs.