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US will ban Wall Street investors from buying single-family homes

reuters.com

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Re: US will ban Wall Street investors from buying single-family homes

#951

Post by gfaster »

jojobas wrote: post #812
gfaster wrote: post #585

Earlier quoted context omitted.

gp used "rent seeking" correctly. The concept of "landlords do nothing while collecting passive income, therefore not creating any value but instead are just exploiting that they own the land" would be correctly described as "rent-seeking behavior".

This equally applies to any investment income wouldn't it? Dividend, loan interest would all be classed as "unearned income" by a certain economic theory I won't name that keeps causing people suffering a century later. Don't do that.

Investment is generally considered profit-seeking behavior (i.e. not rent-seeking). Building an apartment and renting it out is clearly profit-seeking behavior, but if you were continuing to rent it out doing the bare minimum to keep it from falling over 40 years later, that would be pretty clearly rent-seeking.

From this, we can conclude that there must be some point after an investment is made where continuing to benefit from it transitions to rent-seeking behavior.

Re: US will ban Wall Street investors from buying single-family homes

#952

Post by ricardobeat »

WalterBright wrote: post #741
ricardobeat wrote: post #387

Earlier quoted context omitted.

Except they do, as the original comment already said. The rich “person” has cash and access to much cheaper credit, is buying multiple properties, not paying the bills and earning rent, the other will have a mortgage.

> The rich “person” has cash and access to much cheaper credit, is buying multiple properties, not paying the bills and earning rent, the other will have a mortgage Rich people do not have cash, as they invest it all. (That's how they became rich.) Rich people do not get away with not paying their bills. Rich people do not earn rent on the house they are living in. Rich people do not get better mortgage rates because…

The original comment said “Rich investors and companies” which is why I put “people” in quotes when replying. This is not about homeowners in different income brackets.

Re: US will ban Wall Street investors from buying single-family homes

#953

Post by bombcar »

bombcar wrote: post #948
john-h-k wrote: post #926

Earlier quoted context omitted.

If mega institutions are financial extractors who will take all money available, and the units can be rented to make more money, why aren’t they doing it? Why would the institution turn away free money but individuals owning the houses wouldn’t?

Because commercial real estate works on weird counter-intuitive things, and dropping rental rates adversely affects their entire portfolio more than leaving a building vacant does.

I should have mentioned a bit more - residential real estate (e.g., your house) is valued on comps for the purposes of a mortgage backed by that property alone - commercial real estate is valued by the local rent multiplier and mortgages are against bundles of it, or the entire company.

So (simplified) an "empty building, but it rents at $2k a month" is valued at 200k say; if you drop the rent to $1500 and now are getting rent paid, the building is valued at $150k.

They're not stupid, they're watching the vacancies and cash flow also, but it's over a bunch of properties, not just one. A single-family landlord who owns one property will start to feel the pain quite quickly of an empty building (and even they should plan for 20% vacancy, one year out of five).

Re: US will ban Wall Street investors from buying single-family homes

#954

Post by LAC-Tech »

bombcar wrote: post #921
LAC-Tech wrote: post #531

Earlier quoted context omitted.

Don't be a coward, and talk about demand for housing, which in Australia is driven by sustained mass migration. The inevitable outcome of this is increasing homelessness, and likely slums when homeless just start building themselves make shift shelter in such large numbers that authorities can't stamp down on it.

We're not supposed to notice that the best thing about migrants (especially the illegal ones!) is that you can cram them 10+ to a house in squalid living conditions that would be abhorrent to most. It's a price we're willing to pay since we're not paying it.

I mean the only downside is the lowering housing and working standards of the native born working class population, but who the fuck cares about them right?

Re: US will ban Wall Street investors from buying single-family homes

#955

Post by WalterBright »

_3u10 wrote: post #873
tptacek wrote: post #478

Earlier quoted context omitted.

You're telling a just-so story, and you can tell because there isn't a simple schematic 1-2-3 story you can make from this about how these people exert control over home prices. Words mean things; wielding scarcity requires you to control enough inventory to manipulate scarcity, and REITs and corporate buyers empirically don't. I get why people like telling stories like this: it suggests there's a single boogeyman th…

Exactly, everyone is for affordability but no one wants their primary residency to be worth 50% less in 5 years. Housing affordability is inherently unpopular with voters.

If it cut my taxes 50%, I would, as I have no intention of selling it.

Re: US will ban Wall Street investors from buying single-family homes

#956

Post by WalterBright »

observationist wrote: post #518
tptacek wrote: post #478

Earlier quoted context omitted.

You're telling a just-so story, and you can tell because there isn't a simple schematic 1-2-3 story you can make from this about how these people exert control over home prices. Words mean things; wielding scarcity requires you to control enough inventory to manipulate scarcity, and REITs and corporate buyers empirically don't. I get why people like telling stories like this: it suggests there's a single boogeyman th…

I don't mean to convey that it's intentional. There's no conspiracy of cigar smoking financiers in tuxedos smoking cigars in dark rooms. It's just like the Carlin observation - there doesn't have to be a big conspiracy. They just know what's good for them. They behave accordingly. The do things that they can, and because those things are relatively new, it's a type of information asymmetry and policy / good intention…

Carlin was a comedian, not a finance person.

Having deep pockets simply means that you lose a lot more money when following money-losing strategies.

Most of these schemes are hare-brained because they do not take into account the time value of money nor the costs of having vacant investments that are not generating revenue.

The way businesses make money is by buying an asset and then immediately putting that asset to work generating revenue.

Re: US will ban Wall Street investors from buying single-family homes

#957

Post by WalterBright »

somenameforme wrote: post #752
WalterBright wrote: post #325

Earlier quoted context omitted.

> They are a tiny portion of the market, but a huge driving force in setting and manipulating prices, because their properties get leveraged, instrumentalized, and securitized, with derivative products, speculation, and all sorts of incentives that you don't normally want operating in the arena of housing. Raising prices when you only have a tiny portion of the market does not work. People won't buy them when there's…

I generally agree with you on market discussions, but I don't think you're considering this one correctly. Imagine a country responsible for just 10% of global oil production decided to stop producing. What's going to happen oil prices assuming no other country starts producing more? They're going to skyrocket in a seemingly irrational way. But it's completely rational. The reason is that they're a finite resource th…

> so there is very minimal price elasticity.

Having lived through the various oil crises, I can confidently assert that there's a great deal of demand elasticity.

For example, when the 70s oil crisis hit, people stopped driving to the store for a loaf of bread, but would shop weekly instead. For another, people buy more fuel efficient cars when gas prices are high. For a third, people switch to electric cars.

There are regular major disruptions in the flow of oil. Pump prices change on a daily basis, and that results in the amount of gas available == number of gallons customers pay for. No gluts and no shortages.

Re: US will ban Wall Street investors from buying single-family homes

#958

Post by WalterBright »

derangedHorse wrote: post #360
WalterBright wrote: post #292

Earlier quoted context omitted.

> Rich investors and companies effectively get to buy homes at a discount vs average joes. Suppose you had $100,000 in cash, and buy a house for $100,000. You'll not be paying 5% interest on a mortgage. But if you did not buy the house, you would be investing that $100,000 for a 5% return. So, you're either paying 5% on the mortgage, or foregoing 5% return for investing that money. The rich person is not getting a di…

An intelligent investor wouldn't buy it outright, they'd get a mortgage with a lower than average interest rate. The appreciation of the home will cover the interest rate over the long run and the interest rate is a small price to pay for keeping most of that $100,000 liquid for other investments.

A finance person will mortgage the house if the mortgage interest rate is less than the investment returns elsewhere. If the mortgage interest is higher, he'll buy it cash.

Re: US will ban Wall Street investors from buying single-family homes

#959

Post by BigTTYGothGF »

6510 wrote: post #945
BigTTYGothGF wrote: post #851

Earlier quoted context omitted.

There's a reason people don't live in that part of the world and it's not because there aren't any houses.

The reasons people do chose to live some place are mostly man made. The reason to buy a property somewhat overlaps but not entirely. The giant machine alone delivers enough hype for some to just buy one. Take care of the boring things and lure them in with killer features. The line is/was planned to have way to many of them. In Japan real estate people already get excited if there is a subway station planned. Houses…

> The reasons people do chose to live some place are mostly man made

Where's the water coming from.

Re: US will ban Wall Street investors from buying single-family homes

#960

Post by john01dav »

What counts as "Wall Street" here. Is it any investment property? After some threshold of owning many homes? If so, how many? 10? 10,000? Something else? Is it net worth? Maximum number of beneficial owners? You must title them in a natural person's name instead of a corporate entity? Your service address for your corporation is on wall street in NYC?

Which option is being proposed vastly changes the merits and problems of this policy, so it's a poor choice that this isn't made abundantly clear.

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