"How this ends up is anyone’s guess, but undoubtedly there is a severe squeeze being felt around the country as lower-, middle- and even upper-class people try to buy homes and find that it’s not feasible for them right now", said the Wolf.
WHY ARE INVESTMENT COMPANIES BUYING HOUSES? REALLY YOU GOTTA ASK! A BETTER QUESTION IS, HOW MANY RENTAL HOUSES DOES IT TAKE TO STABILIZE REIT PORTFOLIOS?
There’s been a lot in the news lately concerning the number of houses being purchased in cash by entities other than individuals rather about investment companies—namely big ones like the big bad wolf BlackRock, going into communities and buying up all the properties for rental purposes depriving individuals/families of the American Dream of home ownership. The home market has been explosive over the past year, with mortgage rates at historic lows and the pandemic leading many people to want to change their living environment all at once. It is estimated 10 to 15 million home shortage currently exists in an inflationary economic market with low-interest rates ...
For middle and upper-income people, their incomes weren’t significantly affected by the pandemic, and the real change for them was that they gained more mobility and could perhaps leave big cities and continue working remotely. The Biden Administration is promoting new zoning regulations requiring low-income MDU's within existing single-family home developments. Should a city or municipality deny these zoning changes then certain funding will most likely be withheld thereby impacting budgets/tax burdens.
There exists a "wolf pack mentality" operating in the housing market including Pension funds, Wall Street banks, and investment firms that are buying family properties not only in the U.S. but also Europe.
Why?
There are many motivating factors, but possibly part of it has to do with "packaging a REIT" or the fact that they want alternative real estate investments to their retail and commercial properties, which may take a long time to recover from the pandemic.
With remote work looking like it’s here to stay, however, the pandemic and the ripple effects could keep the demand for suburban family homes high.
Home purchases from investors went up 2.7% year-over-year in the first quarter of 2021.
Predatory Investors bought around one in every seven homes in the first quarter of this year.
For single-family homes purchased by Wolf investors, there was a 4.8% increase year-over-year in the first quarter. Investors also retain the most significant market share in multifamily properties, having bought nearly 26% of those during the first quarter in the U.S.
Investors see that it’s a good buying opportunity since there’s a growing shortage of homes throughout the country. With limited inventory, many families are going with rentals instead.
Investors have the cash available to buy up the homes quickly and easily, and then they can turn around and rent them to individuals or families who can’t find a home or who maybe can’t afford one.
RUSH TO SAFETY
For these investors, real estate is one of the few safe havens in an incredibly uncertain world.
The unfortunate effects are being felt by lower- and middle-class people, however.
First, many people are reluctant to sell their home now because they’re afraid they might not afford another, meaning further limitations on inventory. Lower-income people have also tended to lose their jobs more often during the pandemic or see declines in income that are pricing them out of homeownership.
Investors are buying everything, including lower-priced homes. One of every five lower-priced homes sold in the U.S. during the first quarter was purchased by an investor.
Cities, where investors have shown particular interest, include Miami, where investor purchases make up nearly 24% of transactions, Atlanta, Jacksonville, and Charlotte.
Unless something changes, there are likely to be serious ramifications of this for years to come because homeownership is the primary vehicle to build wealth.
When priced out of buying a home and being forced to rent, your landlord can also potentially be a big investment firm. That means there may be weaker protections in place, and you don’t have the comfort that you get with a small landlord as far as maintenance and rent stability.
How this ends up is anyone’s guess, but undoubtedly there is a severe squeeze being felt around the country as lower-, middle- and even upper-class people try to buy homes and find that it’s not feasible for them right now.
Blackstone to buy company that rents out 17,000 homes in $6bn deal
Blackstone, the country’s largest private equity firm, has agreed to purchase Home Partners of America, according to the Wall Street Journal. Blackstone previously owned Invitation Homes, currently the largest owner of single-family homes in the country with 80,000 homes, until it sold the last of its shares in the company in 2019.
Concerns have been raised over the presence of investment firms in the housing market as prices have soared over the course of the pandemic, due in part to increased demand for homes, low mortgage rates and a low supply of available housing.
Data from the Bureau of Labor Statistics show that housing prices for renters and homeowners this spring were up 2.2%, while other data, like the S&P Case-Shiller home price index for March, showed home prices were up more than 13% compared to last year.
Big investment companies currently make up a very small percentage of single-family homes – about 2% or 3,000 homes are owned by large companies, according to the Wall Street Journal. A bulk of the rental market, about 85%, is owned by companies with 10 or fewer properties.
Though it may seem small in comparison to the scale of the US housing market, investment companies’ presence are concentrated and can be large in certain areas of the country. Home rental companies are believed to have the upper-hand in the housing market as they can more easily borrow money than the typical average homeowner. They typically target housing markets in cities that are attracting a growing number of young professionals looking for good paying jobs, like Charlotte, North Carolina, and Phoenix, Arizona.
Some analysts have pointed out that home ownership by investment companies helps to hold up the housing industry should there ever be a decline in demand as well as service people who move around frequently and would prefer to rent.
BAIT AND SWITCH ... SORT OF ... RENT TO OWN
In a press release, Blackstone said that Home Partners of America, which gives renters the option to buy the home at a pre-determined price within a 30-day notice, “expands housing access and choice, while providing a clear path to homeownership”.
“The fundamental premise of the [Home Partners of America] platform is to provide residents with the opportunity to live in their chosen home with the option to purchase it,” said Jacob Werner, senior managing director of Blackstone Real Estate. “We intend to build on that goal and expand access to homes across the US.”
