Large investment firms, including BlackRock, JP Morgan and Fundrise, have been buying houses locking out first time home owners. Wall Street Journal. These firms have gone so far as to buy entire subdivisions for rental properties. Cheap loan prices and a huge interest in safe investments means many investors are buying real estate for rental purposes, which has driven up prices to the point where many people cannot afford to buy a house. This is resulting in a major real estate bubble that may eventually burst. Home prices rose 11% in 2020 and are expected to rise an additional 12% in 2021.
My Comment:
This is an older story but BlackRock is trending on Twitter right now and it's something I have wanted to talk about for awhile. This story hits close to home for me because I have been searching for a new home myself. I made quite a bit of money in 2020 and have a decent saving account a small amount of debt.
In theory I should be in the market for a new house or condo. After months of semi-serious searching I have come to the conclusion that I simply cannot afford one right now. Wisconsin's real estate market isn't the hottest in the nation but the prices are still out of control. Anything that is remotely affordable needs at least $50,000 of work to be done and that's assuming you don't get outbid. Most of the houses are in the $300,000 range.
Part of this is due to investors. They have been buying up a lot of cheap housing for rentals and that means that the prices are getting out of control. It's not just the big investment firms too but also the smaller guys that just want the "easy" income that rentals provide.
Immigration isn't helping things either. It's increasing the demand for both rental and home ownership and it is causing prices to go up. My rent has increased massively in the last couple years and I don't see it changing anytime soon until something changes.
The lack of cheap housing is locking a lot of people out of home ownership. People like me cannot afford a house even if our financial situation is good. And I consider it a wealth transfer from the lower and middle classes to the upper classes. Home ownership is one of the better ways to build wealth and is considered an important milestone for young Americans.
I do think this is an issue that has rare bipartisan support. I have seen a lot of that on Twitter today with a lot of right wing people bashing BlackRock and then being surprised when a lot of the far left people are agreeing with them. High housing prices do not benefit anyone except the rich and there are plenty of people on all sides of the political spectrum are against it.
Will anything happen though? I don't think so. Both the Democrats and Republicans have a major problem with being owned by these large investment groups and I doubt any actual reform would have a chance of passing.
But I do think that a crash is coming. The signs are all there for a major collapse in home value and economic recession in general. Inflation is up and prices for everything are out of control. Energy prices are up as well. When that happens I do hope I can take advantage of all the real estate investors who will lose their shirts.
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