There is plenty of idle money in the investment world that needs places to go, unfortunately. Homebuyers are still being priced out by institutional investors looking to be long-term landlords. The market consensus right now is that inflation is here to stay for the next decade and bond prices aren’t adjusting accordingly, so there’s a flood of cash into all asset classes to try to hedge.
> Homebuyers are still being priced out by institutional investors looking to be long-term landlords.
There’s really no evidence that this is the cause of any of the housing bubble. Sure, it makes a good twitter thread, but institutional investors make up a tiny percentage (1%ish) of single family rentals…
As percentage of the entire market, 1% is small. But prices are set on the margin: the currently active buyers and sellers. Only a small fraction of the entire housing stock churns over each year. So if institutional investors want to buy a few thousand homes, it's absolutely substantial on its impact to prices. Only 40,000 homes are sold annually in San Diego county, despite there being 1.4 million residents.
Actually, yes there is. My brother has a senior position at HUD, they've been very concerned about this the last few years.
You won't hear this at the cabinet level, because those are all political appointees, but when you get down to the career people, they have grave concern over institutional buyers.
The two are often intrinsically linked, especially in the case of housing. It's not that one sees house prices rising and says 'inflation!', but more where it would naturally lead.
Or another way...a rise in house prices means a rise in rents which means rise in renter wages which means rise in prices. Over the course of some time, naturally.
They are often linked, but they are not intrinsically linked. I'd argue that "often intrinsically" is oxymoronic anyways.
A rise in the specific asset class of housing lowers the dollars ability to purchase housing, I'll give you that. But asset prices hiking in general are not inflationary. It could be because people are chasing yields (probably inflationary) or it could be that there is new information/discoveries making it so that the expected productivity of these assets is going to be much greater, which is not inflationary.
The cause of the problem is that companies are claiming an outsized share of productivity growth such that the house is simply worth more to them. There’s more money in the investment class than there is among homebuyers, and the investment class needs somewhere to put their money that won’t depreciate.
This is what happens when real wages stagnate for 20 years but the economy keeps growing and consolidating. Eventually it catches up to you and you end up with a decade of stagflation while the imbalance corrects itself and a competitive market is re-established. Unchecked free-market capitalism has its drawbacks in the long term; we fucked around and we’re about to find out.
