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Investors bought 27% of US homes in Q1, as traditional buyers struggle to afford
- qcic 1y ago27% of homes sold, not 27% of US homes. The title is completely misleading. Not a shocker, given high interest rates usually drive down prices, and investors are not getting mortgages. Great investment to keep value, not so much for growth.
- howinator 1y agoThe phrasing was clear to me on first read. I don’t think anyone would assume 27% of all homes are for sale in one 3 month period since that would imply every home is sold, on average, once per year.
- qcic 1y agoGood for you.
- rightbyte 1y agoZillow and the likes flipping homes should raise the number too? But anyway, the trend of corparations buying houses is really bad.
- breckenedge 1y agoThe article says that institutional investing (1000+ homes) is decreasing. > Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said. > And that number could get smaller, amid signs that large institutional investors are scaling back home purchases.
- WalterBright 1y ago[flagged]
- lazide 1y agoDepends on your definition of value. There are many investments structured in a way that mere ownership, as long as comps go up in the local market, will cause increases in value. Don’t look down. It’s also why the current admin seems really intent on bullying Powell into decreasing the fed rate - Trump and many of his friends are very exposed to real estate.
- WalterBright 1y ago"Value" is what you're willing to pay for something.
- MOARDONGZPLZ 1y agoOf course it does. Many houses remain empty because PE firms buy them and hold out for rents locals cannot afford.
- WalterBright 1y agoRent control plays a role in that. If rents are not allowed to rise, the landlord risks locking in a low rent for the indeterminate future. It's a better play to leave it vacant until the rents rise. Rent control is simply a disaster.
- xenihn 1y agoNot true. Do a google search for "rent-fixing algorithms". If you own enough homes in a rental market, you can determine the market rate. An empty house has value simply by depleting local housing stock, since it is giving you greater leverage to drive market rate up. Of course its less value than actually having it rented, but its still value. Tax code will also allow for softening the loss.
- 1y ago
- lotsofpulp 1y agoZillow lost a lot of money trying to flip houses a few years ago and stopped.
- rightbyte 1y agoOk ye well the idea was silly and probably quite easy to game.
- deleted 1y ago[deleted]
- cowsandmilk 1y ago> investors are not getting mortgages I don’t know of any real estate investor who doesn’t use mortgages. The norm is interest-only mortgages and not paying down principal at all.
- cglan 1y agoFeels like non news. Or at least, a continuation of existing trends. We don't build enough housing, so housing becomes a good investment, eventually pricing out everyone except existing investors or people with large assets. We' structured the system so that once you're in you're IN. Leverage, 30yr mortgages, tax deductions all continue to subsidize existing homeowners at the expense of everyone else (who are technically a minority). If this continues, expect to see more and more radical policy proposals by young people.
- deleted 1y ago[deleted]
- bix6 1y agoAnd no replacement births.
- bee_rider 1y agoOn the bright side, the folks who bought houses as investments might see that investment collapse along with the population.
- dymk 1y ago“Private equity firms should not be allowed to own all the land” isn’t a particularly radical policy proposal
- WalterBright 1y agoDistorting markets like that tend to have unforeseen deleterious side effects that just make things worse. For example: rent control
- dymk 1y agoWell, what we have right now obviously isn’t working. So what’s your proposal?
- kaycebasques 1y agoIt's only a 5-year high. Do they not have data before 2020? I need data over a much longer timeframe than 5 years to determine how interesting the 27% number is.
- deleted 1y ago[deleted]
- BMc2020 1y ago[flagged]
- MPSFounder 1y ago[flagged]
- bell-cot 1y ago> ... investor-owned homes account for roughly 20% of the nation's 86 million single-family homes, the firm said. > Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%. > Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said. > ... > Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought ... SO - how many of those mom-and-pop investors are mostly buying homes as investments? Vs. how many are building a well-to-do lifestyle, with a "cabin on the lake up north", and "winter condo in Florida"? (Or buying homes for their less-well-to-do children, maybe with some inheritance tax dodges baked in?) EDIT: The issue with "investor" is here: > Nearly 27% of all homes sold in the first three months of the year were bought by investors -- the highest share in at least five years, according to a report by real estate data provider BatchData. How much does BatchData actually know about the finances and lifestyles of the "mom-and-pop" buyers which it has labeled as "investors"? (Vs. "developers", or "fixer-uppers", or multi-home lifestylers, vs. ...) I don't think we can tell.
- dmoy 1y ago> cabin on the lake up north *inner Minnesotan twitching*
- twoodfin 1y ago“Mom-and-pop” operations holding 1-5 homes sound like classic single-family developers who tackle a small handful of homes at a time.
- Detrytus 1y agoFor me it sounds more like upper middle class family investing their savings in rental properties instead of stock market.
- deleted 1y ago[deleted]
- crazygringo 1y agoIf investors are buying homes to rent them out, then is this really a bad thing? I know a lot of people who have struggled to find homes to rent when they need to move to a new city with a family for a shorter-term job like a year or two. All the homes available are for sale, none are to rent. If it's to rent, it's not taking any living space off the market. And with elevated mortgage rates, it could be smart for people to rent now rather than buy, waiting to buy until interest rates come down.
- deleted 1y ago[deleted]
- peab 1y agoyeah, having homes available to rent is pretty important
- viraptor 1y agoIdeally you want a reasonable balance. And the prices low enough that paying off a mortgage is not too far away from paying the rent. But if 27% is pure corporate investment pushing up the prices - yes, it's bad.
- crazygringo 1y ago> But if 27% is pure corporate investment pushing up the prices - yes, it's bad. But it's not "pure corporate". Quite the opposite. From the article: > mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%. I really don't see anything wrong with mom and pop buying a second or third home to rent out for extra income. And I don't see anything inherently wrong with 27% either. If there aren't enough rental homes, then an increase in the share of investors is exactly what you need to achieve the "reasonable balance" you're talking about. And then there's nothing bad about it -- it's exactly what's best.
- jfengel 1y ago
- codingwagie 1y agoFinancial engineering is why people are poor. They are literally competing for goods and services with investment firms.
- aspenmayer 1y agoMeritocracy looks a bit different when individuals standing alone are expected to go toe to toe with multi-industry corporate conglomerates and their franchisees.
- 93po 1y agoand when society is structured so that the people/orgs with lots of resources have unfair advantage over those who don't (e.g. monopoly powers)
- bryanlarsen 1y agoDon't more than 27% of Americans rent rather than own the housing they live in? It appears 36% rent. Doesn't this mean that the share of owner-occupied housing is going down, not up as the headline implies and readers are assuming?
- jfengel 1y agoI can't vouch for what readers are assuming, but the headline is intended to say that more people are renting because more homes are going to institutions who don't occupy them. The implication is that this drives up the price for renters, because the demand side includes not just money from people seeking a place to live, but much larger amounts of money from other markets.
- appreciatorBus 1y agoIf those homes had been purchased by an owner occupiers, then there would be that many fewer homes for rent, causing rent to go up. The implication of these article is always that investors are somehow unfairly competing against homeowners. But there is only one fixed pool of people competing for housing - something that reduces supply for buyers is increasing it for tenants and vice versa.
- dmbche 1y agoI don't know how it works, but if a renter becomes an owner (i e. A home is purchased by and owner occupier) there is one less renter and one less house available, remaining in balance and prices shouldn't move?
- appreciatorBus 1y agoSure but that is also true going the other way. There's a fixed pool of ppl who need housing (aka the entire population of the country) and a relatively fixed pool of interior floorspace to divvy up among them. Whether each person chooses to/prefers to/is forced to rent or buy is not the driving force behind rent and price changes Rents & prices are moving because the amount of floorspace that exists (in places people want to live) is much lower than the aggregate amt of floorspace people would like there to be. Each month, everyone who needs to buy/sell/rent is forced to play a game of musical chairs. If you don't have a lot of $, you are going to be one of the people w/no chair, and be forced to leave. In any normal market this would trigger vast increases of floorspace (or chair) manufacturing, but in the anglosphere we have convinced ourselves that there is only one true way to live - in a square box with a triangle on top - and we forbid almost every other form on most land, making it extremely difficult to increase the # of chairs.
- SamDc73 1y agoThe solution is simple: loosen regulation around building, and let people build more! When houses become an investment, that's when you start screwing young people! And it stops being an asset if you just simply build more
- thrance 1y agoWhy would a larger supply stop private equity from buying it all?
- AnimalMuppet 1y agoBecause if you get zoning out of the way, we can keep building, and keep building, and keep building. Let them keep buying. But if we build enough, they won't be able to rent it all out. Are they going to keep buying to control the rent-able supply forever? No, they'll run out of money before we run out of buildable land. (Maybe not before we run out of wood, shingles, and labor though...)
- thrance 1y agoAnd then you're left with huge ghost towns, like that one place in Seattle. This seems like a terrible solution, although it might work. And let's not even talk about the environmental impact, it seems to be a taboo nowadays. Why not just prevent private companies from buying homes they don't use, and force them to sell the ones they are currently holding?
- AnimalMuppet 1y agoRight, ghost towns owned by private equity. So I'm not crying. I agree about the environmental impact, though. "Prevent private companies from buying homes they don't use" is going to be a really hard sell legally. (Though, to be fair, changing zoning laws seems also to be a really hard sell...)
- thrance 1y ago
- tedk-42 1y agoThe rich are eating the poor and the middle class are fighting for the scraps.
- ChrisMarshallNY 1y agoI have a friend who is a real estate broker for a rental property investment company. His company goes into neighborhoods that are often struggling, buy houses for cash, gut them, then rent them. They have a lot of buying leverage, because there's no mortgage to deal with. They just slap down the cash. That's one way that higher interest rates cause problems. It's hard to compete with someone that can hand you a cashier's check for $500,000.
- bradfa 1y agoLots of banks now offer “cash equivalent” mortgages. You do more to pre qualify and the bank locks you in with some contracts but then you can make a cash equivalent offer that has no mortgage contingency which can close just as fast as an all cash offer.
- jihadjihad 1y agoI’m having a little trouble squaring the circle of “neighborhoods that are often struggling” and “a cashier's check for $500,000”, but maybe it is a regional US thing.
- ChrisMarshallNY 1y agoIn Long Island, cheap houses are a half mil. I suspect that the Bay Area is even worse.
- giraffe_lady 1y agoMy neighborhood is like this. It's been underresourced and neglected for decades, but is well connected to transit and is adjacent to more prestigious neighborhoods. The buildings being bought are 2-4 unit apartment rental buildings, and quite old, so 300-500k is typical. Then they're downzoned into single family homes or possibly two condos and resold for about double the price I think. Obviously the ones using (and then losing) them as rental housing and the ones buying are completely different groups.
- zdragnar 1y agoIt is very regional. An older house on 5 acres (2 hectare / 20k square meters) could go for $300k. $500k could get you a really nice house. Picking a random rural area in a random midwest state found this beauty: https://www.landsearch.com/properties/16167-160th-st-letts-ia-52754/4546509 https://www.landsearch.com/properties/16167-160th-st-letts-i... The homes investors would look to pick up to flip and sell or rent would go in the $80-120 range in this area, I'd think.
- ahdanggit 1y agoUsing single family homes as an investment vehicle is the weirdest thing to me.
- asdf6969 1y agoWhat percentage of people live in a rental? All rentals were at some point bought by investors. Unless they’re a much smaller volume of total sales (held longer?) then it seems ok even though the number sounds alarming
- fldskfjdslkfj 1y agoThere should be no such thing as single family zoning.
- stephenhandley 1y agoOutlaw corporations from owning single family homes.
- kasey_junk 1y agoExcept the builders who build them right? And the banks that lend against them? And the quasi governmental corporations who buy those loans? If you want to make it so no homes get built at all your proposal seems like a good starting point.
- tptacek 1y agoMaking it so no homes get built is a surprisingly common policy preference.
- mattmcknight 1y ago"Mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5% Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said. And that number could get smaller, amid signs that large institutional investors are scaling back home purchases. Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought, according to data from Parcl Labs."
- tptacek 1y agoExactly why would single family homes receive this odd policy preference? Is the only reason that you couldn't do it at all with multifamily housing (the vast, overwhelming majority of which aren't co-ops, themselves corporations but not the kind you mean)? In which case all you're really doing here is flailing?
- deleted 1y ago[deleted]
- davidw 1y agoPeople want to blame The Bogeyman so bad, but the answer is usually right around the corner in their own neighborhoods: https://bendyimby.com/2024/04/16/the-hearing-and-the-housing-shortage/ https://bendyimby.com/2024/04/16/the-hearing-and-the-housing... I wish everyone who cares about the cost of housing could go to a hearing like that. It's a huge eye opener. Also, here's a good debunking of investors being some kind of root cause rather than a symptom of housing that is scarce: https://www.theatlantic.com/ideas/archive/2023/01/housing-crisis-hedge-funds-private-equity-scapegoat/672839/ https://www.theatlantic.com/ideas/archive/2023/01/housing-cr...
- paulryanrogers 1y agoBoth investors buying up homes and i-got-mine retirees can be part of the problem. They aren't mutually exclusive. One puts pressure on existing stock and the other ensures there's no new stock.
- davidw 1y agoIf you get involved with any of this on the ground, it's not really a 'both' question. It's the NIMBYism. Without that, you build enough for it to become not a very interesting investment and large-scale investors go find something else to put money in.
- bradly 1y agoKey part of the article to me: > Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties In my social circle, if you are going to buy a new house, you are doing everything you can to keep your current house while purchasing the second. It is the clearest path to retirement from traditional 40hr/week employment for the people around me. > Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said. Talking about these two cohorts in the same article may be problematic as they such vastly different motives, operating procedures, and (please don't light me on fire) different regulations needed.
- wepple 1y ago> In my social circle, if you are going to buy a new house, you are doing everything you can to keep your current house while purchasing the second. It is the clearest path to retirement from traditional 40hr/week employment for the people around me. That’s fascinating to me. Generally, the homes people buy to live in aren’t optimal investment properties. Why not sell and buy something optimized for return and growth?
- ledauphin 1y agobecause of your existing mortgage rate
- danny_codes 1y agoLand rents are pretty great in the US at least. Landowners get bailed out by taxpayers when times are hard in many instances. Plus laws are generally designed to protect land rents.
- kasey_junk 1y agoThat doesn’t change the question though. Why would the house you bought last likely be good for renting out? There are much better properties out there generally for residential cash flow. But the probable answer is mortgages. If you got a 30 year mortgage for less than 3% you almost certainly want to do anything you can to keep your hands on it. It’s probably the best financial device ever given to the average consumer.
- charcircuit 1y agoA lot of traditional buyers buy a house as an investment as they plan to sell it before they die or have their children inherit it.
- bee_rider 1y agoSomeone should do a startup that focuses on designing a sort of RV that can be mass produced, for millenials, genZ, and so on. Maybe they could be modular, link them up for communal living, that sort of thing. Climate change isn’t going to be stopped. Don’t get tied to some dirt that’ll be inhospitable before too long. And houses are generally full of obsolete crap anyway, like bad electric wiring, rooms without ethernet, and big empty rooms that need to be inefficiently climate controlled. Tech folks should really lead the way on this. If you are remote and have a high wage, why don’t you live in some futuristic RV off in some idyllic countryside?
- TheBlight 1y agoHave you lived in an RV for very long? After a few days it kind of sucks.
- bee_rider 1y ago~6 months (in an RV, not a more hospitable mobile home). I’ve had worse apartments. Not through winter, though. Millions of people have more experience than me (I’m sure) but a couple days is a pretty low bar. I’d definitely say it wasn’t ideal, the waste situation was certainly not great without a septic tank hook-up! But it is a something that can be iterated on. NIMBYs, on the other hand, there just isn’t any traction there at all.
- ares623 1y agoI'm sure there's an order of magnitude difference between living in an RV for a few days _knowing_ it's temporary (or at least hoping it is), vs living in one knowing it's permanent. You make completely different choices and take on a different mentality. It's like all the UBI tests. It's not meaningful if the participants know the UBI will stop after a certain period.
- tehjoker 1y agoThis sounds like gold plating the refugee lifestyle
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- mattmcknight 1y agoIt's not even a long article, but why are so many of the comments ignoring the end of it? "Indications are that institutional investors are scaling back home sales." from the article would seem to contradict a large number of the comments. -- "Of those, mom-and-pop investors, or those who own between 1 and 5 homes, account for 85% of all investor-owned residential properties, while those with between 6 and 10 properties account for another 5%. Institutional investors that own 1,000 or more homes account for only about 2.2% of all investor-owned homes, the firm said. And that number could get smaller, amid signs that large institutional investors are scaling back home purchases. Out of a group of eight of the biggest companies that own and lease single-family houses, including Invitation Homes and American Homes 4 Rent, six sold more homes in the second quarter than they bought, according to data from Parcl Labs."
- mathfailure 1y agoWhat a weirdly chosen set of buckets [1,5] and [6,10]. What'd be the percentages for buckets like [0,1] homes and [2,∞)?
- ryandrake 1y agoYea really weird. 1 home usually doesn’t even mean you are an investor: you just own one home and live in it. And then 5 homes? That’s not what anyone would think of as “mom and pop.” That’s a very large real estate investment business. I’d just ignore people with one home because they are not investors. Have one “mom and pop” bucket for people with 2 homes, one rented out, and then another bucket for businesses with 3+ homes, 2+ rented out.
- mattmcknight 1y agoThe original source explains that it is 1 home in addition to a primary residence.
- mathfailure 1y agoIf demand is so high - where's your capitalism's rule that supply should rise to meet the demand??
- darth_avocado 1y agoBecause it’s not free market capitalism. Zoning, NIMBYs, over regulation etc. all together ensure supply demand economics don’t work the way they should.
- some_random 1y agoFirst off, this is only for homes sold in the first 3 months which based on the extremely limited data I've looked at[1] seems to meaningfully below the total number of homes sold. With that said, this is still way more than I expected, I probably would have guessed closer to 2.7% than 27%. Edit: Oh nevermind, they included individuals owning 1-99 houses buying rental properties as investors making institutional investors more like 2.2% (of the 27%) much more in line with what I would have guessed. [1]https://www.census.gov/construction/nrs/pdf/newressales.pdf https://www.census.gov/construction/nrs/pdf/newressales.pdf
- nobodyandproud 1y agoFinancially, the only disincentive to owning a second home is that the home mortgage interest doesn’t apply but I’m not sure what the disincentive ought to be. Also, mom and pops owners shouldn’t get a free pass here, as the quality of life plummets with renters.
- ryangrange 1y agoAnd with their upcoming tax breaks they'll pour their extra money into even more assets like houses to rent out at more than our wallets can bear.
- 3rdDeviation 1y agoI get the feeling this kind of activity is misunderstood and perceived as repugnant because, unlike most investment options, this one is actively creating haves and have-nots. Most other investments are fractional, meaning there's a pool of the same asset available to many investors and your purchase doesn't necessarily limit their opportunity. But when you're "investing" in your first home, it's not a decision between safe or unsafe investments, debt or equity (or crypto) - it's a combination of needs and wants. And oftentimes you're in direct competition with someone who wants to make the same investment. In this case, losers are forced to reallocate more of their income to cover rents and winners are alleviated of that same burden. When the winner is an investor with multiple homes, mom & pop or not, they are claiming the same rents that burden those who have lost their chances to invest because of competition. Personally, I think people need to start thinking on moral terms when they look to invest their money into rental homes. I've never seen somebody who owns multiple homes actually put any sweat into their equity. At least, none of their own sweat. And rental properties are almost never maintained - they slowly slide into oblivion because every decision is a cash flow decision. When you own the home, the decision to maintain the property reflects personal and social influences, not just long-term returns.
- lanfeust6 1y agoIf you consider that 27% of homes are not vacant, then its clear this is not the core problem. Homes get rented out. We don't build enough
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- sorcerer-mar 1y agoNo, what prompted me to say you don't understand LVT was the suggestion there needs to be some determination of what the "highest use" is. Yes, if you hold land in a place where a lot of people around you (and/or the state) is investing in economic development, your carrying cost will increase and the ultimate goal is for you not to be able to extract uncapped gains from the appreciation that people around you are generating. > you will raise taxes on their now-high value urban SFH because they aren't producing anything (aka "fully utilized") This is the type of statement that makes me suspect again you do not understand LVT. You don't raise taxes because they aren't producing anything. The tax goes up as the value of the land goes up as already occurs with property taxes. The only difference is that if you decide to build a second house on your property, your taxes would not go up under LVT, whereas under the current property tax regime, it would go up dramatically. This has the net effect of incentivizing people to fully utilize their land, but does not require any determination of their utilization nor does it "raise taxes" on them for failing to utilize. > like you said, it's a neutral shift. if the cost of the property goes down because of a higher tax, then it's a neutral shift This is not what's described by "neutral." It's neutral because right now your property tax is already both an LVT and a tax on the improvements. LVT would increase the LVT component and decrease the improvement component. If the introduction of LVT reduces the value of a property, then it would accordingly reduce the carrying cost of that property. Your two variables are mutually exclusive under a revenue-neutral scheme.
- outlore 1y agoseems analagous to console scalpers, for which the solution has always been more supply