4 ms·

There isn’t a supply issue. There is a corporations buying property issue.

refurb 4y ago
So too many buyers and not enough houses? Sounds like a supply issue.
diogenescynic 4y ago
You've got it backwards. The bigger issue is that we aren't building new supply to meet demand. Corporations buying property is only an issue because we've stopped/slowed new home development/supply to not keep up with demand. Allow supply to meet demand and the corporations don't have a market to monopolize. This is the law of supply and demand 101. But the same people that are usually against corporations buying properties, are usually against new home development and increased housing density. I saw many housing activists in the Bay Area who were against new housing at market rates and thought all new housing should be at below-market-rate prices--which simply isn't possible.
epistasis 4y ago
I sometimes hear people say this, but it makes zero sense to me, and I can never get anybody to explain what they mean by it. Could you try to explain how we have enough houses but somehow corporations are the problem?
- kitsunesoba 4y ago
  Corporate buyers are one of the many exacerbating factors, and I think that’s what most are saying when they say corporate home buying is a problem. In other words, there aren’t enough homes and corporations sitting on some percentage of them is making the situation that much worse.
  - epistasis 4y ago
    I don't understand how a corporate purchaser is worse than any other investor; I live in an area with almost only single family homes, and a huge fraction of them are investor owned and rented out. The small time land lords have a huge variance in how well they behave, but I'm not sure why corporate landlords are worse.
    - kitsunesoba 4y ago
      I think the idea is that corporate owners are helping keep prices propped up because they’re much less sensitive to vacancy. They can let a house sit unoccupied for much longer before dropping the price to get someone in compared to a small time landlord. Smalltimers don’t usually have the capital available to do that and will either need to drop prices to get someone in the house or sell the house.
      - epistasis 4y ago
        Perhaps I'm too used to the California market, where the carrying cost of a long-held property goes basically to zero, and most landlords are long time holders of property. So those who have recently bought a property, even corporate buyers, are far far more likely to keep a property occupied than most landlords.
- buscoquadnary 4y ago
  Basically RE prices went through the roof and became an object of investment that gained in value during a time when money was cheap and cash was a bad place to store it. This caused management funds, BlackRock Berkshire etc, to start purchasing the homes as investment vehicles. These vehicles then will either sit on a house or simply rent the house out at a rate that makes fiscal sense, regardless of the economic realities. This artificially restricts supply as they take these houses off the market, they don't care if the house sits empty for years as long as they can sell it at their target price, and then at the same time causes rents to be raised as the rental prices are set by an internal ROI formula and not what the local market can bear.
  - epistasis 4y ago
    I can understand a small time house investor not renting out the house, and I see that all around me, in a very very tight housing market. Small time owners of 2-3 houses, especially those who have paid off the mortgage, avoid the hassle of renting because they have limited time to seek out tenants and deal with them, or limited tolerance for risk from a bad tenant. But I can not for one moment understand a cooperate buyer not renting it out; they have more than enough capacity to rent out homes, they can spread risk across lots of properties, and any time not spent renting is merely money left on the table, which would come back to bite any manager that is leaving a lot of money on the table.
  - mywittyname 4y ago
    And some of those investors already lost their asses buying up SFH. I'm sure the rest see the writing on the wall. For example, BRG spun off a home trust division just this month, and it's the one that bought up all of these SFH during the boom. Could it be that they were expecting a massive drop in value of these investments? SFH are a pretty insane choice of RE investment for institutions because they are so incredibly inefficient compared to apartment and office buildings.
  - quonn 4y ago
    > This artificially restricts supply as they take these houses off the market, they don't care if the house sits empty for years as long as they can sell it at their target price Private owners would also sit it out if they can. Unless they can't. You think that's better? People having to sell at a big loss?
- insanitybit 4y ago
  I assume because it allows for what amounts to price fixing.
  - epistasis 4y ago
    They would have to consist of a huge fraction of the market in order to do price fixing, but the highest percentage of purchases I have ever seen referenced is about 10% of purchases in a time period, which doesn't get anywhere close to having a significant number of the housing stock.
    - insanitybit 4y ago
      How huge, do you think? I imagine that in actuality 10% would be enough to move the market, especially if other players do the same.
      - epistasis 4y ago
        10% of a few quarters of purchases is still a tiny tiny tiny fraction of the market, and not enough to coordinate pricing. I think a far bigger concern is shortages of housing as individual homeowners and landlords act as a group to suppress local supply of housing. Local city councils tend to be controlled by such real estate interests. Corporate purchasers can piggy-back on that sort of regulatory capture without expending a single dime.

So too many buyers and not enough houses? Sounds like a supply issue.

You've got it backwards. The bigger issue is that we aren't building new supply to meet demand. Corporations buying property is only an issue because we've stopped/slowed new home development/supply to not keep up with demand. Allow supply to meet demand and the corporations don't have a market to monopolize. This is the law of supply and demand 101. But the same people that are usually against corporations buying properties, are usually against new home development and increased housing density. I saw many housing activists in the Bay Area who were against new housing at market rates and thought all new housing should be at below-market-rate prices--which simply isn't possible.

epistasis 4y ago

I sometimes hear people say this, but it makes zero sense to me, and I can never get anybody to explain what they mean by it. Could you try to explain how we have enough houses but somehow corporations are the problem?

kitsunesoba 4y ago
Corporate buyers are one of the many exacerbating factors, and I think that’s what most are saying when they say corporate home buying is a problem. In other words, there aren’t enough homes and corporations sitting on some percentage of them is making the situation that much worse.
- epistasis 4y ago
  I don't understand how a corporate purchaser is worse than any other investor; I live in an area with almost only single family homes, and a huge fraction of them are investor owned and rented out. The small time land lords have a huge variance in how well they behave, but I'm not sure why corporate landlords are worse.
  - kitsunesoba 4y ago
    I think the idea is that corporate owners are helping keep prices propped up because they’re much less sensitive to vacancy. They can let a house sit unoccupied for much longer before dropping the price to get someone in compared to a small time landlord. Smalltimers don’t usually have the capital available to do that and will either need to drop prices to get someone in the house or sell the house.
    - epistasis 4y ago
      Perhaps I'm too used to the California market, where the carrying cost of a long-held property goes basically to zero, and most landlords are long time holders of property. So those who have recently bought a property, even corporate buyers, are far far more likely to keep a property occupied than most landlords.
buscoquadnary 4y ago
Basically RE prices went through the roof and became an object of investment that gained in value during a time when money was cheap and cash was a bad place to store it. This caused management funds, BlackRock Berkshire etc, to start purchasing the homes as investment vehicles. These vehicles then will either sit on a house or simply rent the house out at a rate that makes fiscal sense, regardless of the economic realities. This artificially restricts supply as they take these houses off the market, they don't care if the house sits empty for years as long as they can sell it at their target price, and then at the same time causes rents to be raised as the rental prices are set by an internal ROI formula and not what the local market can bear.
- epistasis 4y ago
  I can understand a small time house investor not renting out the house, and I see that all around me, in a very very tight housing market. Small time owners of 2-3 houses, especially those who have paid off the mortgage, avoid the hassle of renting because they have limited time to seek out tenants and deal with them, or limited tolerance for risk from a bad tenant. But I can not for one moment understand a cooperate buyer not renting it out; they have more than enough capacity to rent out homes, they can spread risk across lots of properties, and any time not spent renting is merely money left on the table, which would come back to bite any manager that is leaving a lot of money on the table.
- mywittyname 4y ago
  And some of those investors already lost their asses buying up SFH. I'm sure the rest see the writing on the wall. For example, BRG spun off a home trust division just this month, and it's the one that bought up all of these SFH during the boom. Could it be that they were expecting a massive drop in value of these investments? SFH are a pretty insane choice of RE investment for institutions because they are so incredibly inefficient compared to apartment and office buildings.
- quonn 4y ago
  > This artificially restricts supply as they take these houses off the market, they don't care if the house sits empty for years as long as they can sell it at their target price Private owners would also sit it out if they can. Unless they can't. You think that's better? People having to sell at a big loss?
insanitybit 4y ago
I assume because it allows for what amounts to price fixing.
- epistasis 4y ago
  They would have to consist of a huge fraction of the market in order to do price fixing, but the highest percentage of purchases I have ever seen referenced is about 10% of purchases in a time period, which doesn't get anywhere close to having a significant number of the housing stock.
  - insanitybit 4y ago
    How huge, do you think? I imagine that in actuality 10% would be enough to move the market, especially if other players do the same.
    - epistasis 4y ago
      10% of a few quarters of purchases is still a tiny tiny tiny fraction of the market, and not enough to coordinate pricing. I think a far bigger concern is shortages of housing as individual homeowners and landlords act as a group to suppress local supply of housing. Local city councils tend to be controlled by such real estate interests. Corporate purchasers can piggy-back on that sort of regulatory capture without expending a single dime.