As the real estate market continues to break records, a cabal of institutional investors has been tossing gasoline on the fire - buying up properties hand-over-fist as middle-American renters watch their dreams of home ownership fade at the hands of pension funds and other financial behemoths.A bidding war broke out for the Amber Pines 124-unit rental-housing community built by D.R. Horton.
"You now have permanent capital competing with a young couple trying to buy a house," according to real estate consultant John Burns, whose firm estimates that in many of the country's hottest markets, roughly one 20% of homes sold are bought by someone who never moves in.
"That’s going to make U.S. housing permanently more expensive," said Burns, who thinks home prices will climb as much as 12% this year, on top of last year's 11% rise.
"Limited housing supply, low rates, a global reach for yield, and what we’re calling the institutionalization of real-estate investors has set the stage for another speculative investor-driven home price bubble," his firm concluded - finding Houston to be a favorite location for investors, who have accounted for 24% of home purchases in the area.
The coronavirus pandemic sparked a race for home-office space and yards. Occupancy rates reached records and rents are rising with home prices. The ecosystem of companies that service, finance and mimic the mega landlords is booming.
Burns counted more than 200 companies and investment firms in the house hunt: computer-assisted flipper Opendoor Technologies Inc., money managers including J.P. Morgan Asset Management and BlackRock Inc., platforms such as Fundrise and Roofstock that buy and arrange for the management of rentals on behalf of individuals and builder LGI Homes Inc., which now reports wholesale home sales to bulk buyers in its quarterly results. -WSJ
In one example, a bidding war broke out over a D.R. Horton complex in Conroe, Texas - after the homebuilder put the entire subdivision up for sale. After a "Who's Who of investors and rental-home firms flocked to the December sale," the winning bid of $32 million came from an online property-investment company, Fundraise LLC, which manages over $1 billion for around 150,000 individuals, according to the Wall Street Journal.
D.R. Horton ended up booking roughly twice what it typically makes selling houses to middle-class homebuyers according to the report.
"We certainly wouldn’t expect every single-family community we sell to sell at a 50% gross margin," said CEO Bill Wheat at a recent investor conference.
What does this mean for the average American family? We'll let Twitter analyst @APhilosophae take it from here in this ominous, yet soberingly accurate thread:
entire neighborhoods out from under the middle class? Lets take a look. Homes are popping up on MLS and going under contract within a few hours. Blackrock, among others, are buying up thousands of new homes and entire neighborhoods. https://t.co/mBDLgtoyEc— CulturalHusbandry (@APhilosophae) June 9, 2021
As an example, a 124 new home neighborhood was bought in its entirety in Texas. Average Americans were outbid to a tune of $32million. Homes sold at an avg if 20% above listing. Now the entire neighborhood is made up of SFR's. What are SFR's??https://t.co/luVQEXUeKy— CulturalHusbandry (@APhilosophae) June 9, 2021
This is wealth redistribution, and it ain’t rich people’s wealth that’s getting redistributed. It’s normal American middle class, salt of the earth wealth heading into the hands of the worlds most powerful entities and individuals. The traditional financial vehicle gone forever.— CulturalHusbandry (@APhilosophae) June 9, 2021
FEDERAL RESERVE FUNDED FINANCIAL INSTITUTE.
Let that sink in for a minute. Got it? They’re using your tax dollars to fuck over the lower and middle class, and its permanent. Not 1 Pres. administration of bullshit. This is a fundamental reorganization of society.— CulturalHusbandry (@APhilosophae) June 9, 2021
In the US and other nations home ownership is often the 1st and most vital step. This can provide for generational wealth and success. But as permanent, guaranteed renters youre pissing away a lifetime of equity and the chance for mobility. You just become a peasant.— CulturalHusbandry (@APhilosophae) June 9, 2021
This is warfare. Make no doubt about it. Lloyds bank in London is doing it, as is every great financial institute across the world. This must be stopped. Its a greater threat than the slow creep of Communism, BLM or anything else you can think of COMBINED. It is a death stroke.— CulturalHusbandry (@APhilosophae) June 9, 2021
Now imagine every major institute doing this, because they are. It can be such a fast sweeping action that 30yrs may be overshooting it. They may accomplish feudalism in 15 years.— CulturalHusbandry (@APhilosophae) June 9, 2021
Click on any of the above tweets to continue reading.