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Not to be pedantic, but this would make you not so "pro capitalism as it comes". The ability to develop and sell houses, but not hold them (in service of rent-seeking) runs contradictory to the very core tenant of capitalism, which is private property and free markets. Socialism and supply/demand-markets are not mutually exclusive; it sounds like you're more amenable to a socialist or mixed-market system than you giv…
almost, but rent-seeking is an odd form of capitalism, because in its pure form it isn't providing value. nothing in the real world is in its pure form, and some business are able to provide value which they cannot charge for because they can rent-seek on other areas, so there is always nuance. but an economy where rent-seeking is the main path to wealth is an economy in really poor shape.
Earlier quoted context omitted.
Closing certainty is a major reason people will take all-cash offers over financed ones. Even if you're pre-approved for a loan.
A cash offer will still fall apart if the appraisal comes in too low, I would think. Or does the term "cash offer" imply that no appraisal will be done?
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There are so many confounding factors that this can't be taken at face value. Immigrants go where jobs are in general and it's demand for workers that causes housing prices to go up. If there was zero immigration there would still be huge housing demand in SF and LA.
edit: I say "minimum 35%" because that is just the percentage of immigrant-demand that managed to secure housing. Hard to say exactly how many more immigrants are bidding on SF & LA-County housing but 35% is the absolute floor.
One of the issues the article doesn't mention is that these houses are effectively cheaper to purchase for corporate owners. Generally they can borrow money at a lower rate, but the ability of corporate owners to use depreciation on a new purchase to offset profits from previous purchases is more significant. Effectively they are redirecting money that would be paid in taxes into the payments on the new purchase.
This is not true at all. Corporate loan rates are generally pretty damn high, only exceptionally can they borrow for low rates. Mortages however are a special case since they are basically mandated to be low and safe by most governments in exchange for letting banks exist. Or in the US explicitily guaranteed through freddie mac and fannie may.
The final phase is to exit via UPREIT for OP units rather than cash, with the REIT getting a step up in basis that can be depreciated again, while still not triggering any capital gains for you until you convert
Earlier quoted context omitted.
Closing certainty is a major reason people will take all-cash offers over financed ones. Even if you're pre-approved for a loan.
A cash offer will still fall apart if the appraisal comes in too low, I would think. Or does the term "cash offer" imply that no appraisal will be done?
One of the issues the article doesn't mention is that these houses are effectively cheaper to purchase for corporate owners. Generally they can borrow money at a lower rate, but the ability of corporate owners to use depreciation on a new purchase to offset profits from previous purchases is more significant. Effectively they are redirecting money that would be paid in taxes into the payments on the new purchase.
As another commenter pointed out, buying a home to live in gets you lower interest rates than buying for any other reason. > but the ability of corporate owners to use depreciation on a new purchase to offset profits from previous purchases is more significant. If you're referring to cost segregation, this is probably less true now than in the past. It used to cost a lot of money to do a cost segregation analysis, an…
If I am blackrock? If I am smaller PE deploying 10 million a year?
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Not if private equity just snatches it all up. Yes build more. Also regulate the oligarchs until they no longer exist.
PE buying real estate is a long bet on housing prices. If supply increases enough, prices flatten out and then fall, and the longs get crushed. These investments are a bet on continuing to under-build and under-densify.
Me: "should we stop allowing private equity to hold property?"
My Strawman: "nah let's build more houses to be snatched up by private equity, that way eventually maybe they'll be really nice and decide to lower prices for us someday due to the infallible balance of supply and demand that definitely hasn't been rigged to hell over the past half century. They certainly won't just continue to rig the system to benefit themselves"
When we bought our first home, a townhouse, in the early 1990s the builder only sold to people that were going to live in said home. They helped save the down payment and made sure that utility payments (gas/electric) were under a certain amount each month (super insulated and heated with a hybrid hot water system). Bigelow Homes, they were on a few This Old House episodes in the 80s. It would be nice to see that aga…
That sounds like an absolute dream compared to today's market
https://www.census.gov/housing/hvs/files/currenthvspress.pdf
I would bet most, if not almost all homes, are sold to buyers who will occupy them.
This graph goes further back:
https://fred.stlouisfed.org/series/RHORUSQ156N
More info:
https://en.wikipedia.org/wiki/Homeownership_in_the_United_St...
I just watched a video from Dave Ramsey title "What the Government Should Do to Fix the Housing Problem" He specifically calls out Institutional Investors and Foreign Corporations that have been purchasing single family housing and converting them into rental properties. I think he makes some good point in his video: https://youtu.be/_CrgniwSLLM