According to a recent report from the Wall Street Journal, roughly 200 investment firms are buying tens of thousands of homes — and sometimes entire neighborhoods — raising prices, and competing with middle-class Americans looking to take advantage of low-interest rates and buy their first home.
In January, D.R. Horton Inc. purchased an entire subdivision in Conroe, Texas, built 124 houses, and then put the entire neighborhood on the block. The winning bid for $32 million dollars came from Fundrise LLC, an online real estate investing platform that lets you invest in commercial real estate through real estate investment trusts. A combination of investors swooping up single-family houses to rent out or flip, some of the lowest interest rates in history, and a housing shortage has caused home prices to surge, pricing normal people out of being able to purchase a home.
Over the past several months, investors have made up around 25% of home purchases. Home prices rose double digits in 2020, and are expected to climb another 12% in 2021. The bubble is reminiscent of 2004 and 2005 prior to the housing crash. Although this bubble is a bit different, after the 2008 financial crisis, investors snapped up tens of thousands of foreclosed homes and rented them out. After testing his plan out on three different houses in three different markets, Billionaire B. Wayne Hughes dispatched deputies to buy tens of thousands more across the U.S. Hughes’s company American Homes 4 Rent now owns about 53,000 suburban houses in 22 states and collects about $1 billion in annual rent from tenants. His plan paid off big. While millions of Americans were underwater – owing more on their mortgages than their homes were worth – investors accounted for about a third of sales in many markets.
After the crash, the government incentivized Wall Street to step in where individual home buyers were not. In 2012, the federal government launched a program that allowed corporations to easily purchase foreclosed homes by the thousands from Fannie Mae. The corporations then rented out the homes, creating more housing in areas heavily hit by foreclosures. Between 2011 and 2017, some of the world’s largest hedge funds spent billions of dollars on almost a quarter of a million homes. In parts of Atlanta, they bought almost 90 percent of the 7,500 homes sold between January 2011 and June 2012. Wall Street became the new landlord.
Rather than protecting communities and making it easy for homeowners to restructure bad mortgages, the government facilitated the transfer of wealth from the American people to private-equity firms. By 2016, 95 percent of the distressed mortgages on Fannie Mae and Freddie Mac’s books were auctioned off to Wall Street investors.
Wall Street’s latest mass real estate grab has grown to tens of billions of dollars, representing hundreds of thousands of properties. In some communities, it has fundamentally altered housing ecosystems, fueling a housing boom without a homeowner boom. Private-equity firms have developed new ways to secure credit, enabling them to leverage their equity and acquire a nearly endless amount of homes.
Corporations are banking on a new housing bust as well. Currently, over 11 million families are behind on their rent or mortgage payments: 2.1 million families are behind at least three months on mortgage payments, while 8.8 million are behind on rent. Homeowners alone are estimated to owe almost $90 billion in missed payments. The last time this many families were behind on their mortgages was during the Great Recession.
June 30, which is three weeks from Wednesday– the current nationwide eviction/foreclosure moratorium will expire. If you are not in a mortgage forbearance program with your lender and you’re behind on your payments because of the pandemic, the roof over your head now may end up becoming the bank’s.
“The foreclosure moratorium on government-backed loans has virtually stopped foreclosure activity over the past year,” Rick Sharga, executive vice president of RealtyTrac, told Inman.
On top of the profits they’re racking up right now, investors will soon be able to do what they did during the recession, scoop up thousands of foreclosed homes and then rent them back to the people who lost them.
During the current housing bubble, more than 200 corporations and investment firms are in the housing hunt. J.P. Morgan Asset Management and BlackRock Inc are among the biggest players, competing against everyday Americans in search of their first home. Most are being priced out easily by billion-dollar companies. Builders like LGI Homes Inc are wholesaling thousands of homes to bulk buyer investors. Investment manager PCCP LLC – which typically goes after commercial property – recently bought several rental-home communities throughout the Southeast.
Madison Realty Capital – a New York City based real estate private equity firm – moved into rentals with clients that used to focus on developing apartment buildings. Madison Realty recently closed on a $110 million project in Los Angeles, and nearly one third of the 700 home sites are being sold to investors.
“A lot of things that would have been for-sale housing are going to be for-rent housing,” Josh Zegen, Madison’s managing principal told the Wall Street Journal.
Ben Shapiro stood out on Thursday as one of the few people defending investment firm BlackRock, after reports revealed their investments are driving up prices in the housing market.
“I see many people are enraged at Blackrock,” Shapiro said in a series of tweets. “Blackrock is buying homes from people willing to sell them. If you don’t like what they’re doing, target the loose governmental policy incentivizing this sort of investment.”
Other commentators had a different take on the issue, including author Carol Roth, who said that Americans should not have to compete with Blackrock and other corporations in pursuit of the American Dream.
“You shouldn’t have to compete with #Blackrock to buy your home. The Fed’s cheap flood of money sells Main Street out to Wall Street. This is the war on the little guy. This is the war on small business. This is central planning’s ultimate nefarious plan.”
Nefarious plans indeed. Once again, while Main street suffers, Wall Street is making more money than ever before.
During the lockdowns – which we know now had no link to reduced mortality – billionaires became ten trillion dollars richer, which the poor and middle class were decimated. Over 60% of all small businesses were closed forever, the wealth of the middle class was wiped out, and Americans were shoved further into the cul-de-sac of labor.
Just as the World Economic forum correctly predicted the pandemic as well as the cyber attacks, the ‘great reset’ to our economy was accurately predicted as well. A true reset to the American economy is in fact underway, and by the end of it Americans will own less than they ever have before.
The Davos 2021 World Economic Forum occurred on January 25 with more than 1,200 delegates from 60 countries participating in the virtual event. The ‘Great Reset’ was the theme of the unique twin summit, convened by the 51st WEF annual meeting.
In their 9 predictions for the future economy, the World Economic Forum predicts that by 2030 ‘you will own nothing, and you will be happy,’ and that anything that you want or need, you will simply rent from a mega-corporation.
They also predict that eating meat will become an occasional treat, the west will welcome more refugees, and Gasoline will be a thing of the past. The WEF states that ‘bold initiatives’ are needed to reduce the unsustainable inequalities of wealth and power around the world, but inequality of wealth and power has only being growing.
Some have pointed to the timing of the recent cyber attacks on meat processing companies and fuel pipelines – as well as corporations buying up all available homes, the lockdowns, and the surging inflation – expressing their skepticism of these supposed coincidences.
