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I'm not talking about whether it's intentional. I'm talking about whether it's possible. If corporate investors could control the price of housing, I believe th

by tptacek 10mo ago

I'm not talking about whether it's intentional. I'm talking about whether it's possible. If corporate investors could control the price of housing, I believe they would. I can buy a house tomorrow and hold it vacant off the market at a listing price 3x its value. I will have zero impact on the housing market. You may be conflating the listing price of an asset with the clearing price of that same asset. You can, obviously, build up inventory to manipulate prices. To do that, you have to be able to generate scarcity, which is exactly what corporate investors aren't doing. You've just given me 6 more paragraphs about the control you think they have, and you still haven't told a simple 1-2-3 story about how they're using a microscopic footprint in the total housing market to distort prices. You have to do better than "supply and demand normally influence pricing feedback at much more granular levels". In the context of your original claim, of them being "a huge driving force in setting and manipulating prices", you need to explain how that would actually work, and not rely on handwaving.

conductr 10mo ago
I think your case on this debate is more sound however > To do that, you have to be able to generate scarcity, which is exactly what corporate investors aren't doing. But they did. When inventory was low and then zero percent rates where available, they bought everything they could and drove prices up and created an appreciation bubble. I don’t think they have some other dark patterns for manipulating the market but they had access to a lot of basically free cash. Inventory of houses for sale is a tiny portion of the total market and they could and did contribute to driving prices up. But so did everyone that had the opportunity and inclination to do so, and why not when money is free leverage the shit out of it in an asset class that will generally appreciate without much risk. I don’t know what ever came of that now that rates have increased. Are they still holding those homes? Did they sell them after driving prices up? (But not fast enough to make prices go down again obviously). Are they landlords now? Etc. The market is still reeling from that economic situation that created this. Prices may eventually float down but no seller is eager for that so it’s a bit sticky.
- tptacek 10mo ago
  My case is built on the empirics that corporate investors are a very small fraction of the available houses for sale. Notice the stories you're reading about places where corporations are disruptive: they're in thin markets. A corporate investors can totally (if temporarily) fuck up the prices in a single subdivision. But unless they can do that across a broader market, they don't have meaningful pricing control. My claim would be that in any any of the top 10 markets by transaction volume (just to pick a handy metric out of the sky; you could choose others), corporate investors are literally a nonfactor.
  - conductr 10mo ago
    They don’t have to buy to fuck up the market. They just have to bid. If there’s low inventory, people that actually need to buy a home are forced to beat/match the bidding. They can also target just specific areas of specific major metros and there are ripples throughout the entire market. The housing “market” does work the same as the stock or commodity markets. People aren’t buying an intangible share. They’re buying this specific and unique house and if they’re told “we just got a cash offer for $50k over ask”, they may be tempted to beat it. That doesn’t happen when people buy AAPL. The shares are fungible. There’s only empirical evidence of their buying activity. We’ll never know how many deals they bid the price up on but didn’t buy. This auction like quality is evident in any market like this; watch Storage Wars and one disinterested buyer will bid up the price just to fuck with his competing bidders.
    - tptacek 10mo ago
      Respectfully, I think this is just made up. "They just have to bid" to manipulate prices in the real estate market: I don't think you can show that's a thing. Please by all means make the attempt.
      - conductr 10mo ago
        As I said, there’s no data on this. Unaccepted offers don’t get tracked anywhere and don’t show up in anyone’s financial records. However, have you ever participated in a “multiple offer, best and final” type RE market? There’s plenty of opportunities for what I explained in market conditions we saw in recent past in many parts of US.

by tptacek 10mo ago

conductr 10mo ago

I think your case on this debate is more sound however > To do that, you have to be able to generate scarcity, which is exactly what corporate investors aren't doing. But they did. When inventory was low and then zero percent rates where available, they bought everything they could and drove prices up and created an appreciation bubble. I don’t think they have some other dark patterns for manipulating the market but they had access to a lot of basically free cash. Inventory of houses for sale is a tiny portion of the total market and they could and did contribute to driving prices up. But so did everyone that had the opportunity and inclination to do so, and why not when money is free leverage the shit out of it in an asset class that will generally appreciate without much risk. I don’t know what ever came of that now that rates have increased. Are they still holding those homes? Did they sell them after driving prices up? (But not fast enough to make prices go down again obviously). Are they landlords now? Etc. The market is still reeling from that economic situation that created this. Prices may eventually float down but no seller is eager for that so it’s a bit sticky.

tptacek 10mo ago
My case is built on the empirics that corporate investors are a very small fraction of the available houses for sale. Notice the stories you're reading about places where corporations are disruptive: they're in thin markets. A corporate investors can totally (if temporarily) fuck up the prices in a single subdivision. But unless they can do that across a broader market, they don't have meaningful pricing control. My claim would be that in any any of the top 10 markets by transaction volume (just to pick a handy metric out of the sky; you could choose others), corporate investors are literally a nonfactor.
- conductr 10mo ago
  They don’t have to buy to fuck up the market. They just have to bid. If there’s low inventory, people that actually need to buy a home are forced to beat/match the bidding. They can also target just specific areas of specific major metros and there are ripples throughout the entire market. The housing “market” does work the same as the stock or commodity markets. People aren’t buying an intangible share. They’re buying this specific and unique house and if they’re told “we just got a cash offer for $50k over ask”, they may be tempted to beat it. That doesn’t happen when people buy AAPL. The shares are fungible. There’s only empirical evidence of their buying activity. We’ll never know how many deals they bid the price up on but didn’t buy. This auction like quality is evident in any market like this; watch Storage Wars and one disinterested buyer will bid up the price just to fuck with his competing bidders.
  - tptacek 10mo ago
    Respectfully, I think this is just made up. "They just have to bid" to manipulate prices in the real estate market: I don't think you can show that's a thing. Please by all means make the attempt.
    - conductr 10mo ago
      As I said, there’s no data on this. Unaccepted offers don’t get tracked anywhere and don’t show up in anyone’s financial records. However, have you ever participated in a “multiple offer, best and final” type RE market? There’s plenty of opportunities for what I explained in market conditions we saw in recent past in many parts of US.