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Thursday, June 17, 2021

What Happens When Hedge Funds Buy Up Neighborhoods

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A conversation on Twitter this week resurfaced a Wall Street Journal report from April about big investors getting into real estate, overbidding normal people to do so. “If You Sell a House These Days, the Buyer Might Be a Pension Fund,” the title says. “Yield-chasing investors are snapping up single-family homes, competing with ordinary Americans and driving up prices.”

The resulting social media traffic made the article No. 1 on the WSJ website on June 10.

“You now have permanent capital competing with a young couple trying to buy a house,” real estate consultant John Burns told the Wall Street Journal. “That’s going to make U.S. housing permanently more expensive.” His firm estimates “that in many of the nation’s top markets, roughly one in every five houses sold is bought by someone who never moves in.”

Thread.

Blackrock is buying every single family house they can find, paying 20-50% above asking price and outbidding normal home buyers. Why are corporations, pension funds and property investment groups buying…https://t.co/uTagTOQQgI

— CulturalHusbandry (@APhilosophae) June 9, 2021

Congress’s Profligacy Endangers Americans’ Futures

This is a direct consequence of the Fed printing so much money and long encouraging debt by keeping interest rates so low for so long that investors are looking for better assets. Our government has long privileged debt over savings in large part because that makes it easier for the government to deficit spend, making debt less costly to Congress. So normal people essentially get punished for saving because Congress won’t stop spending.

Since the government quietly taxes away your savings through inflation, people and institutions who want to put money away for future use, or just grow their assets, are forced into riskier and more distortive behavior. Thus mega-dollar money asset managers and private equity firms are snapping up millions of homes at inflated prices because government profligacy has made it harder for them to secure a yield.

“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,” the Journal

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