10 ms·

Investor home purchases drop 30%

86 points by lxm 4y ago

rcpt 4y ago
It'd be great if it were possible to buy a house and not have it be an "investment"
- socialismisok 4y ago
  Yes, 1000 times yes. The idea that housing is an investment (or that you can invest in housing you'll never use) distorts so many systems in America. We stop thinking about housing as something everyone needs and start thinking about making sure we get ours before others do.
  - TulliusCicero 4y ago
    Exactly. Imagine if the supply of new cars dropped through the floor and prices shot up, especially for used cars. Oh wait, this actually happened during the pandemic and nobody was like, "oh this is good, people's car equity is going up!" because with things that aren't houses people have a saner view of finances.
    - quonn 4y ago
      I know a lot of people who started to think of their cars as appreciating assets.
      - TulliusCicero 4y ago
        Now imagine people start trying to ban car companies from making new cars, because they'll probably just be luxury cars for brogrammers anyway, plus more cars means less parking availability!
      - saltcured 4y ago
        Hah, so this becomes the same trap as thinking that way about a primary home. Do they have a plan for selling to realize their gains? Do we get to look forward to car-equity lines of credit or reverse car loans where people try to have their cake and eat it?
  - Simon_O_Rourke 4y ago
    I'd be interested to see more of what the likes of Singapore do, especially for larger metropolitan areas. As I understand it, and I could be way wrong here, but I think there's a government office that buys and sells properties, but with restrictions on price and who can buy through the schema. Anyone else is totally free to conduct private property transactions, but get slapped with an almost-unmanageable property tax, making it more economical to go through official channels. This then lets the government rather than the market set the fair rate for a particular house in a particular area. https://darrenong.sg/blog/a-complete-guide-to-buy-a-property-in-singapore/ https://darrenong.sg/blog/a-complete-guide-to-buy-a-property...
    - herodoturtle 4y ago
      You might also be interested in checking out Sweden’s public housing policies. They vary slightly from one municipality to the next, but an interesting concept overall.
      - mijamo 4y ago
        Sweden Public housing is terrible. You get in the queue at 16/18 and maybe maybe when you're 30 you can get a nice 2 rooms apartment on the suburbs. Except if you managed to either buy someone's contract illegally, or use family connections to get in front of the queue. If you are a recent immigrant there is basically no point going in the queue and you will be forced to expensive second hand contract and move every year as they expire. And then there's no logic to prices. You will get something cheaper in your 50s because you waited so long that you can finally get a nice spacious apartment for no money at all in the city center, while a student will have to pay more than that to get a shitty corridor room in the suburbs. Real life example: a friend paying 6000kr for a room in the suburbs as a student vs a 40yo lady with a good income paying the same for a 2 bedroom appartment in the center (market rent for second hand contracts for such a flat is about 19 000kr). And then you have newly built public housing in the suburbs that has prices 2-3 times more expensive than the old ones in the center for the same size, but those you can get without waiting whereas the old ones need more than 20 years of queue to get. It is probably the most broken system in Sweden, but it kind of seems to be by design to be honest. I would actually have liked a well functioning and supplied public housing market, compared to the annoying parts of the private market in most countries, but swedish rules have just made it a nightmare instead
- beembeem 4y ago
  This was an explicit goal of housing policy in the US 100 years ago. Read any text from that time period and you will see that housing was viewed as an investment and the foundation of wealth. Policy was therefore supportive of this view. It's time we revisited this now that the country looks very different. - For one, there is a large trend towards urbanization which changes the makeup of the country. - The 30 year fixed-rate mortgage and mortgage interest deduction (now capped, and less impactful given higher standard deduction amounts) have been a large contributor to housing values being distorted from normal market prices. - Throw in low interest rates, widespread speculation, financialization of real estate (ABNB, loanmls.com, etc) you end up with a human right being divvied up by institutions, speculators, and an aging wealthy populace that has no interest in sharing the pie.
  - alvah 4y ago
    “The 30 year fixed-rate mortgage and mortgage interest deduction (now capped, and less impactful given higher standard deduction amounts) have been a large contributor to housing values being distorted from normal market prices.” I’m not sure how much of a factor that is - here in Australia our house price : household income ratio is, if anything, even more deranged than it is in the US, and 30 year fixed rates are unheard-of here - maybe 2 year fixed rates at certain times, but usually most mortgages are variable (and usually at higher rates than in the US).
  - dagw 4y ago
    The 30 year fixed-rate mortgage and mortgage interest deduction...have been a large contributor to housing values being distorted from normal market prices. That should be easy to test. Hardly any other country has 30 year fixed rate mortgages and lots of countries have far lower mortgage interest deduction. Would be interesting to measure the distortions in those countries and compare to the US.
    - jleyank 4y ago
      Canada has no mortgage interest deduction and feels it has a real problem with vacant/investment housing (particularly in Toronto or Vancouver). Given that it’s adjacent to the us this should give you useful data. But I think a big problem is that more housing would result in lower house values which would bother the crap out of oldies and conservatives.
neonate 4y ago
https://archive.ph/NS5CX https://archive.ph/NS5CX
bearmode 4y ago
Good. Private landlords shouldn't exist.
- socialismisok 4y ago
  With the exception of people who are landlords for the purposes of mutual aid. We rented a room out for a bit, but only charged "what you could pay" with a hard upper cap of "what it costs is to maintain the unit". We have people live with us for free, for in kind services, or paying whatever they could afford and still be saving money.
  - poisonarena 4y ago
    this one exception is pretty nice, but not realistic or common
    - socialismisok 4y ago
      It's realistic, but not common. We did it, and we did it because we read about someone else doing it.
- InCityDreams 4y ago
  I've lived in shared; government subsidised; private association, and private-landlord housing. Currently have mortgaged home. As someone who has never had a problem in the private sector, quite the opposite, why shouldn't private landlords exist? (Personally, my beef is with private utility companies, but even so....).
- jnwatson 4y ago
  I don't understand this at all. There are certainly plenty of problems in the housing market, but the existence of landlords isn't one of them. Even if you ignore the substantial amount of work it takes to actually maintain a property, find and deal with tenants, the basic tenets of capitalism still apply: somebody has to allocate capital in a speculative manner to predict future needs. It is very easy for a landlord to lose their shirt in even conservative investments. Landlords justify their rate of return due to the financial risk and the cost of capital. My parents lost a lot of money buying and renting property. You can lose money due to tenants destroying property, you can lose money due to insufficient occupancy, and you can lose money by the value of the house going down.
socialismisok 4y ago
It absolutely kills me that there are approximately 30 empty homes for every homeless person in the States. (Roughly 550k homeless and roughly 16M vacant homes.) Investors are part of the problem, but by no means the only part. Anything that reduces investor speculation on housing and returns units to the rental or purchase markets is ok by me.
- ncallaway 4y ago
  Every time I hear this statistic it drives me insane. I really wish there was an exponential property tax based on the number of properties that someone or some entity owns. I don’t think it would actually be feasible to implement, but I wish something like it existed. Owning one property? Reasonable/cheap property tax. Own two properties? Pretty expensive property taxes. Own three properties? Eye watering property taxes. Own more than three? Truly insane property taxes. Especially for vacant properties
  - refurb 4y ago
    Or, stay with me here, you just build enough housing? I know it’s a crazy idea, so go easy on me.
    - mordae 4y ago
      I've seen some calculations suggesting that the speculators will buy up anything at this point. It's impossible to build enough. Partly because buying up new houses protects the investment into the already owned. Also, what makes you think the market is not working and new houses are not being built at the highest possible pace? Given the prices, that would be a sensible assumption, no?
      - refurb 4y ago
        Houses aren't being build which is the reason we're in trouble. And no, investors won't buy up all the houses. Blackrock's massive home buying fund was <1% of the total value of the housing market.
roenxi 4y ago
A fun thought experiment - imagine a fantasy society with no credit. Everyone who can buys a house based on their wealth. Introduce a bank into the picture, making loans. How does that change the situation? It might not cause more houses to be built, because the physical situation hasn't changed. but it does mean that everyone ends up having to spend a lot of time working for the bank because it ends up that people with access to credit end up in a bidding war to try and buy houses. We've tried very low interest rates in the west for a long time now. There is a dire shortage of hard evidence that it has helped people to own houses. Credit unwinds are painful in the short term, but in the long term I don't think it will be a major problem. Profound sadness for the people who were caught out with debt in the near future though.
- sph 4y ago
  > We've tried very low interest rates in the west for a long time now. There is a dire shortage of hard evidence that it has helped people to own houses. It hasn't helped because it is more profitable to get money on a loan to pay back later — that is, enter a short position against the currency and pay back later when it is cheaper to do so. Loans are granted proportionally to entities based on their wealth, so companies and rich people are more likely granted bigger lump sums, which they use to invest in real estate among other things, than people on regular or minimum wage. So, during low interest rates, more loans are given out, wealthy entities buy real estate with the easy money, leaving everybody else to live on the scraps and/or creating an abusive rental market, unless there is strong housing laws enforced by the government. If there aren't, you have situations like London, where most of the city centre is empty flats bought by rich foreign investors, and actual citizens are driven further away into the suburbs, in an rental market that becoming more and more unaffordable. IMO there is no economical solution to the housing crisis, because loans always favour the wealthy, and they're always in look for investment products; real estate is one of the safest.
- skybrian 4y ago
  Timing is everything. Being able to buy a house and live in it before you can pay for it is a substantial benefit. This is what loans do. There's no reason why it wouldn't cause houses to be built earlier than they would otherwise. I thought this was interesting: > Bricks — actual bricks, not stacks of cash — are another common savings mechanism, especially for working-class Argentinians. The value of bricks is fairly stable, and they’re useful to a family building out their house. Argentina doesn’t have a mortgage industry, and thus buying a pallet of bricks each time you get a paycheck is an effective way to pay for your home in installments. > (Bricks aren’t fully monetized, in that I don’t think people buy bricks and then sell them later, so people only use this method of saving when they actually have something they want to use the bricks for.) > As you can imagine, there are challenges that come with saving in wads of $100 bills or stacks of bricks. For one thing, they take up a lot of space. Worse, your life savings are also at constant risk of theft, damage, and fire. If something does happen, the bills are not insured or protected by any institution; they’re just gone. https://www.freethink.com/hard-tech/crypto-argentina-black-market-cash https://www.freethink.com/hard-tech/crypto-argentina-black-m...
qprofyeh 4y ago
It’s early, I thought I read that prices were down 30%. It’s the activity of home purchases by companies. To be honest the remainder is still absolutely too much.
xenonite 4y ago
The basic pattern is that new investor homes can't even be rented. The investor rather chooses to keep it in pristine condition and sell it later at a much higher price. At least in big German cities, this is what I heard.
bmitc 4y ago
Investor-only home purchases should be regulated or taxed out of existence. There are at least two such homes in my neighborhood. They're just sitting there empty, slowly degrading I'm sure, while people are doing everything to try and get in a home.
- choward 4y ago
  There should be different zoning and taxes for different types of homes. A primary residence only zone for example. There is a huge difference between primary residents and vacation/rental homes and their role in society. In the same way "ride sharing" is a loophole to have a taxi company without the regulations, Airbnb found a loophole for running a hotel company without the regulations. The homes rented out for days at a time should not count toward the housing supply and only be allowed on designated areas just like hotels.
  - bennysonething 4y ago
    So people who want to rent shouldn't be allowed to live near people who buy? Why?
    - brianwawok 4y ago
      It’s a PC friendly way to say you don’t want to live by poor people.
      - filoleg 4y ago
        I honestly believe that the grandparent comment didn't have such intent in mind. However, even though OP likely didnt have such intentions, I agree with your overall assessment of what would happen. If their proposal was implemented on scale, it would have naturally ended up in a situation that you are describing. And for that reason (+a lot of other unwanted second-order effects others have mentioned), I am definitely not into the idea of such zoning at all.
    - kyleee 4y ago

86 points by lxm 4y ago

rcpt 4y ago

It'd be great if it were possible to buy a house and not have it be an "investment"

socialismisok 4y ago
Yes, 1000 times yes. The idea that housing is an investment (or that you can invest in housing you'll never use) distorts so many systems in America. We stop thinking about housing as something everyone needs and start thinking about making sure we get ours before others do.
- TulliusCicero 4y ago
  Exactly. Imagine if the supply of new cars dropped through the floor and prices shot up, especially for used cars. Oh wait, this actually happened during the pandemic and nobody was like, "oh this is good, people's car equity is going up!" because with things that aren't houses people have a saner view of finances.
  - quonn 4y ago
    I know a lot of people who started to think of their cars as appreciating assets.
    - TulliusCicero 4y ago
      Now imagine people start trying to ban car companies from making new cars, because they'll probably just be luxury cars for brogrammers anyway, plus more cars means less parking availability!
    - saltcured 4y ago
      Hah, so this becomes the same trap as thinking that way about a primary home. Do they have a plan for selling to realize their gains? Do we get to look forward to car-equity lines of credit or reverse car loans where people try to have their cake and eat it?
- Simon_O_Rourke 4y ago
  I'd be interested to see more of what the likes of Singapore do, especially for larger metropolitan areas. As I understand it, and I could be way wrong here, but I think there's a government office that buys and sells properties, but with restrictions on price and who can buy through the schema. Anyone else is totally free to conduct private property transactions, but get slapped with an almost-unmanageable property tax, making it more economical to go through official channels. This then lets the government rather than the market set the fair rate for a particular house in a particular area. https://darrenong.sg/blog/a-complete-guide-to-buy-a-property-in-singapore/ https://darrenong.sg/blog/a-complete-guide-to-buy-a-property...
  - herodoturtle 4y ago
    You might also be interested in checking out Sweden’s public housing policies. They vary slightly from one municipality to the next, but an interesting concept overall.
    - mijamo 4y ago
      Sweden Public housing is terrible. You get in the queue at 16/18 and maybe maybe when you're 30 you can get a nice 2 rooms apartment on the suburbs. Except if you managed to either buy someone's contract illegally, or use family connections to get in front of the queue. If you are a recent immigrant there is basically no point going in the queue and you will be forced to expensive second hand contract and move every year as they expire. And then there's no logic to prices. You will get something cheaper in your 50s because you waited so long that you can finally get a nice spacious apartment for no money at all in the city center, while a student will have to pay more than that to get a shitty corridor room in the suburbs. Real life example: a friend paying 6000kr for a room in the suburbs as a student vs a 40yo lady with a good income paying the same for a 2 bedroom appartment in the center (market rent for second hand contracts for such a flat is about 19 000kr). And then you have newly built public housing in the suburbs that has prices 2-3 times more expensive than the old ones in the center for the same size, but those you can get without waiting whereas the old ones need more than 20 years of queue to get. It is probably the most broken system in Sweden, but it kind of seems to be by design to be honest. I would actually have liked a well functioning and supplied public housing market, compared to the annoying parts of the private market in most countries, but swedish rules have just made it a nightmare instead
beembeem 4y ago
This was an explicit goal of housing policy in the US 100 years ago. Read any text from that time period and you will see that housing was viewed as an investment and the foundation of wealth. Policy was therefore supportive of this view. It's time we revisited this now that the country looks very different. - For one, there is a large trend towards urbanization which changes the makeup of the country. - The 30 year fixed-rate mortgage and mortgage interest deduction (now capped, and less impactful given higher standard deduction amounts) have been a large contributor to housing values being distorted from normal market prices. - Throw in low interest rates, widespread speculation, financialization of real estate (ABNB, loanmls.com, etc) you end up with a human right being divvied up by institutions, speculators, and an aging wealthy populace that has no interest in sharing the pie.
- alvah 4y ago
  “The 30 year fixed-rate mortgage and mortgage interest deduction (now capped, and less impactful given higher standard deduction amounts) have been a large contributor to housing values being distorted from normal market prices.” I’m not sure how much of a factor that is - here in Australia our house price : household income ratio is, if anything, even more deranged than it is in the US, and 30 year fixed rates are unheard-of here - maybe 2 year fixed rates at certain times, but usually most mortgages are variable (and usually at higher rates than in the US).
- dagw 4y ago
  The 30 year fixed-rate mortgage and mortgage interest deduction...have been a large contributor to housing values being distorted from normal market prices. That should be easy to test. Hardly any other country has 30 year fixed rate mortgages and lots of countries have far lower mortgage interest deduction. Would be interesting to measure the distortions in those countries and compare to the US.
  - jleyank 4y ago
    Canada has no mortgage interest deduction and feels it has a real problem with vacant/investment housing (particularly in Toronto or Vancouver). Given that it’s adjacent to the us this should give you useful data. But I think a big problem is that more housing would result in lower house values which would bother the crap out of oldies and conservatives.

neonate 4y ago

https://archive.ph/NS5CX https://archive.ph/NS5CX

bearmode 4y ago

Good. Private landlords shouldn't exist.

socialismisok 4y ago
With the exception of people who are landlords for the purposes of mutual aid. We rented a room out for a bit, but only charged "what you could pay" with a hard upper cap of "what it costs is to maintain the unit". We have people live with us for free, for in kind services, or paying whatever they could afford and still be saving money.
- poisonarena 4y ago
  this one exception is pretty nice, but not realistic or common
  - socialismisok 4y ago
    It's realistic, but not common. We did it, and we did it because we read about someone else doing it.
InCityDreams 4y ago
I've lived in shared; government subsidised; private association, and private-landlord housing. Currently have mortgaged home. As someone who has never had a problem in the private sector, quite the opposite, why shouldn't private landlords exist? (Personally, my beef is with private utility companies, but even so....).
jnwatson 4y ago
I don't understand this at all. There are certainly plenty of problems in the housing market, but the existence of landlords isn't one of them. Even if you ignore the substantial amount of work it takes to actually maintain a property, find and deal with tenants, the basic tenets of capitalism still apply: somebody has to allocate capital in a speculative manner to predict future needs. It is very easy for a landlord to lose their shirt in even conservative investments. Landlords justify their rate of return due to the financial risk and the cost of capital. My parents lost a lot of money buying and renting property. You can lose money due to tenants destroying property, you can lose money due to insufficient occupancy, and you can lose money by the value of the house going down.

socialismisok 4y ago

It absolutely kills me that there are approximately 30 empty homes for every homeless person in the States. (Roughly 550k homeless and roughly 16M vacant homes.) Investors are part of the problem, but by no means the only part. Anything that reduces investor speculation on housing and returns units to the rental or purchase markets is ok by me.

ncallaway 4y ago
Every time I hear this statistic it drives me insane. I really wish there was an exponential property tax based on the number of properties that someone or some entity owns. I don’t think it would actually be feasible to implement, but I wish something like it existed. Owning one property? Reasonable/cheap property tax. Own two properties? Pretty expensive property taxes. Own three properties? Eye watering property taxes. Own more than three? Truly insane property taxes. Especially for vacant properties
- refurb 4y ago
  Or, stay with me here, you just build enough housing? I know it’s a crazy idea, so go easy on me.
  - mordae 4y ago
    I've seen some calculations suggesting that the speculators will buy up anything at this point. It's impossible to build enough. Partly because buying up new houses protects the investment into the already owned. Also, what makes you think the market is not working and new houses are not being built at the highest possible pace? Given the prices, that would be a sensible assumption, no?
    - refurb 4y ago
      Houses aren't being build which is the reason we're in trouble. And no, investors won't buy up all the houses. Blackrock's massive home buying fund was <1% of the total value of the housing market.

roenxi 4y ago

A fun thought experiment - imagine a fantasy society with no credit. Everyone who can buys a house based on their wealth. Introduce a bank into the picture, making loans. How does that change the situation? It might not cause more houses to be built, because the physical situation hasn't changed. but it does mean that everyone ends up having to spend a lot of time working for the bank because it ends up that people with access to credit end up in a bidding war to try and buy houses. We've tried very low interest rates in the west for a long time now. There is a dire shortage of hard evidence that it has helped people to own houses. Credit unwinds are painful in the short term, but in the long term I don't think it will be a major problem. Profound sadness for the people who were caught out with debt in the near future though.

sph 4y ago
> We've tried very low interest rates in the west for a long time now. There is a dire shortage of hard evidence that it has helped people to own houses. It hasn't helped because it is more profitable to get money on a loan to pay back later — that is, enter a short position against the currency and pay back later when it is cheaper to do so. Loans are granted proportionally to entities based on their wealth, so companies and rich people are more likely granted bigger lump sums, which they use to invest in real estate among other things, than people on regular or minimum wage. So, during low interest rates, more loans are given out, wealthy entities buy real estate with the easy money, leaving everybody else to live on the scraps and/or creating an abusive rental market, unless there is strong housing laws enforced by the government. If there aren't, you have situations like London, where most of the city centre is empty flats bought by rich foreign investors, and actual citizens are driven further away into the suburbs, in an rental market that becoming more and more unaffordable. IMO there is no economical solution to the housing crisis, because loans always favour the wealthy, and they're always in look for investment products; real estate is one of the safest.
skybrian 4y ago
Timing is everything. Being able to buy a house and live in it before you can pay for it is a substantial benefit. This is what loans do. There's no reason why it wouldn't cause houses to be built earlier than they would otherwise. I thought this was interesting: > Bricks — actual bricks, not stacks of cash — are another common savings mechanism, especially for working-class Argentinians. The value of bricks is fairly stable, and they’re useful to a family building out their house. Argentina doesn’t have a mortgage industry, and thus buying a pallet of bricks each time you get a paycheck is an effective way to pay for your home in installments. > (Bricks aren’t fully monetized, in that I don’t think people buy bricks and then sell them later, so people only use this method of saving when they actually have something they want to use the bricks for.) > As you can imagine, there are challenges that come with saving in wads of $100 bills or stacks of bricks. For one thing, they take up a lot of space. Worse, your life savings are also at constant risk of theft, damage, and fire. If something does happen, the bills are not insured or protected by any institution; they’re just gone. https://www.freethink.com/hard-tech/crypto-argentina-black-market-cash https://www.freethink.com/hard-tech/crypto-argentina-black-m...

qprofyeh 4y ago

It’s early, I thought I read that prices were down 30%. It’s the activity of home purchases by companies. To be honest the remainder is still absolutely too much.

xenonite 4y ago

The basic pattern is that new investor homes can't even be rented. The investor rather chooses to keep it in pristine condition and sell it later at a much higher price. At least in big German cities, this is what I heard.

bmitc 4y ago

Investor-only home purchases should be regulated or taxed out of existence. There are at least two such homes in my neighborhood. They're just sitting there empty, slowly degrading I'm sure, while people are doing everything to try and get in a home.

choward 4y ago
There should be different zoning and taxes for different types of homes. A primary residence only zone for example. There is a huge difference between primary residents and vacation/rental homes and their role in society. In the same way "ride sharing" is a loophole to have a taxi company without the regulations, Airbnb found a loophole for running a hotel company without the regulations. The homes rented out for days at a time should not count toward the housing supply and only be allowed on designated areas just like hotels.
- bennysonething 4y ago
  So people who want to rent shouldn't be allowed to live near people who buy? Why?
  - brianwawok 4y ago
    It’s a PC friendly way to say you don’t want to live by poor people.
    - filoleg 4y ago
      I honestly believe that the grandparent comment didn't have such intent in mind. However, even though OP likely didnt have such intentions, I agree with your overall assessment of what would happen. If their proposal was implemented on scale, it would have naturally ended up in a situation that you are describing. And for that reason (+a lot of other unwanted second-order effects others have mentioned), I am definitely not into the idea of such zoning at all.
  - kyleee 4y ago