By: Laura Christie
17 Jun 2022
I have A LOT of questions about the housing market that no one seems willing or able to answer. Some journalists have written stories about specific problem pockets, but most just write what’s dictated to them by “sources” with (in)vested interests and agendas. Politicians are universally useless. Even if they get the gist of the desperation and depravity at the core of the issue, they offer platitudes along the lines of “I’m calling for investigations into ______.” (The same thing they do every time there’s a shooting, price increase, supply shortage, or scandal and somehow get awarded political credits they later cash in for votes.) There is job security in actively doing nothing and being able to blame the other guy for preventing action. The two institutions of accountability are deeply corrupted by the usefulness of apathy. Political leadership and the media are almost* universally complicit in reducing this country to a real-life Lord of the Flies existence.
Humans have very basic needs – air, water, and food are, in that order, the top three. After them, shelter is, without a doubt, the next most important necessity to survival. Clothing & education are arguably next in line – without a barrier against frigid temperatures, we’d die; without learning which berries are poisonous, we’d die. Beyond those six basic requirements, we transition to wants versus needs – conveniences, if you will. Electric saws are far more convenient than flint axe heads, a sewing machine is much faster than hand sewing with a bone needle, and sometimes a frozen pizza cooking away in your oven while you take a hot shower is better than really good sex. But the fact is, everything listed after those first six basic needs are luxuries. We can actually survive on very little. Our government recognizes that air, water, and food are imperative to survival. They recognize that clean air and a constant, accessible, affordable supply of clean water and food is a fundamental part of their job and if they don’t ensure the existence of all three there will be hell to pay come election time.
But somehow, we’ve decided that shelter is an investment, a hedge against inflation, a portfolio asset, and a right for some, but not for all. Our government refuses to recognize that available, affordable housing is a basic human right and a necessity to survival of individuals and society.
The United States voted in favor of the Universal Declaration of Human Rights in 1948.
That is the country we were after World War II. The United States and forty-seven other countries voted in favor of a document that enshrined universal equality, security, and opportunity.
Later, beginning in the 1970s, when asked to codify these articles into legally binding obligations by way of ratification of the International Covenant on Civil and Political Rights, the United States showed its true colors – they signed it for the glorious fanfare of media attention, then dragged out ratification for nearly two decades and added so many reservations, understandings, and declarations as to render it moot as it applies to Americans. It’s a bit like the 21st Century politician who preens before the cameras and media scribes saying that (s)he will open an investigation or present legislation regarding a festering problem, then the next day go back to business as usual taking donations from price-gouging gasoline manufacturers and trading stocks using insider information gleaned from committee meetings. They get credit for “doing something” while doing exactly nothing and continuing to enable the abuse of citizens.
For our purposes, let’s focus on two articles within the Universal Declaration of Human Rights:
Article 17: 1. Everyone has the right to own property alone as well as in association with others. 2. No one shall be arbitrarily deprived of his property.
Article 25: Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, and medical care and necessary social services and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
In 1948, Americans agreed with these sentiments. Today? Not so much.
If you’re wealthy you have a right to own as many homes as you want. If you’re a member of the 95% of the population who does not have access to easy money, low interest loans, high paying jobs, tax avoidance opportunities, etc., you have no right to the security of a rental home from which you cannot be evicted without cause or wherein you will be free of annual rent increases; and you most certainly do not have the right to own a home, much less multiple homes, thereby gaining access to the luxuries afforded by ownership – consistent monthly payments, stability, income tax advantages, equity accumulation, loan collateral, and dignity.
Americans have been trained to accept abuse. Your ancestors were run off their land and murdered by Europeans? Get over it. Your ancestors were kidnapped by a rival tribe, sold to European slave traders who sold them on to sugarcane, cotton, and tobacco farmers in the Colonies? Get over it. Your ancestors were coal miners who died young and in debt to the mine owner because they were forced to rent and buy supplies from the mine owner? Get over it. Because of your socio-economic situation, geographic location, gender, skin color, religion, or sexual orientation you did not have access to quality education, secure housing, or job opportunities? Get over it. You were abused by a Weinstein, Epstein, or a priest? Get over it, you’re making it up, you’re a complainer, a drama queen. You asked for it because you wore a skirt, talked to him, or entered his field of view.
Anyone who studies history outside of the tripe taught in public schools in this country, knows two things: #1 We are the descendants of survivors of abuse – survivors who wanted better for us, who broke their backs to ensure future generations had opportunities and freedoms they did not. And #2, Corruption is a recurring cancer that consumes societies unless excised quickly and destroyed. Over and over, absolute power has corrupted absolutely and for some reason we keep selecting the same type of leaders (if not actually the exact same leaders), expecting a different outcome.
Either through intentional cruelty or absolute witlessness, the rights this country was founded upon have been prejudiced to the point We the People have been stripped of them while those in power, through money or position, are swaddled in them.
I concede that We the People have participated in our own indenture via our own indifference. A mere fifty years ago, We the People were far more educated about the way things work. Either due to the education system or just having to figure things out without the benefit of the internet; we learned how things were built, how they worked, and how to fix them. We took all the free time we had courtesy of technology like home appliances, automobiles, and fax machines and used it to investigate curiosities. Now? Now all our free time (and then some) is spent lost in the noise of (social)media. Twenty-four-hour “news” and opinion being hawked as fact have turned us from questioning how things work to arguing about natterings.
So, if I may, I’d like to discuss housing – how the system works, how it’s being manipulated, and how that manipulation is at the rotten core of the hate infection we’re battling.
“There are far-reaching problems still with us for which democracy must find solutions if it is to consider itself successful. For example, many millions of Americans still live in habitations which not only fail to provide the physical benefits of modern civilization but breed disease and impair the health of future generations…” Franklin D. Roosevelt, State of the Union Message 1937, speaking to the issue of a lack of adequate and affordable housing.
“Equal opportunity for all Americans in education and housing is essential if we are going to keep our nation from being torn apart.” George Romney, former Governor of Michigan and Secretary of Housing and Urban Development, circa 1970.
“A lot of people don’t look at housing as a human right, but it is. To have a decent place to live is a basic human right.” Former President Jimmy Carter to Richard Florida in Bloomberg 27 Jul 2017.
“He who controls the spice controls the universe.” Barron Harkonnen, Dune (film) (1984)
“Everybody knows the fight was fixed. The poor stay poor, the rich get rich. That’s how it goes. Everybody knows.” Leonard Cohen, lyrics from Everybody Knows.
“…the law never laid a finger on the gold bandits. No statute in America blocked the two men from buying all the gold they wanted.” Kenneth D. Ackerman in The Gold Ring: Jim Fisk, Jay Gould, and Black Friday, 1869.
“He Has 17,700 Bottles of Hand Sanitizer and Nowhere to Sell Them” New York Times, 14 Mar 2020
“Plus ça change, plus c’est la même chose.” Jean-Baptiste Alphonse Karr, circa 1862.
The more things change, the more they stay the same. A motto unique to humanity? Quite possibly. Whereas wildlife evolves quickly to adapt to our persistent meddling in its habitats, we stubbornly refuse to change. Perhaps it’s fear, perhaps it’s stupidity. When Fisk and Gould perpetrated their Gold lockup whammy in 1869, it cast shade on Grant’s presidency, but ultimately amounted to a “nothing burger” for Fisk and Gould. That same year, the National Woman Suffrage Association was formed and women who supported suffrage were pilloried. When “retail arbitragers” decided try to cash in on COVID panic by hoarding hand sanitizer in early 2020, they were justifiably vilified and “Cancelled”. When investors hoard housing for profit, it’s not only widely accepted; it is government endorsed and financially supported.
Americans have a certain malleability when it comes to their outrage. Women want to vote??? How dare they!!! Two fat old white guys want to hoard gold to manipulate the market for their own profit, hurting importers and exporters trying to earn a living and ruining parties not privy to the con? Meh, who cares. Certain “entrepreneurs” want to hoard cleaning supplies and personal protective equipment during a crisis? Off with their heads!!! “Capitalists” and “disruptors” are hoarding homes and driving up prices, property taxes, and poverty? They’re generous, star-spangled Americans doing a kindness for citizens by providing rental homes and quick property sales. We can rationalize any outrage as long as we’re biased enough towards the perpetrators.
I came to this topic by accident. In the fall of 2019 we decided we’d had enough of California – the costs, the taxes (F**k You, SALT capping-Congress), the draught, the wildfires, the earthquakes, the over-crowding, the endless traffic jams…and began to look to other states for a new bolt hole. We considered a handful of states due to past experience living in them or because of family connections and took a couple of trips to scout locations in December 2019 and February 2020. In early March 2020 we were about to submit an offer on a townhome, but owing to our front row seats to the data coming out about SARS-CoV-2 by way of my husband’s occupation, and rumors of impending lockdowns, we decided not to sign the offer and risk being stuck having to honor a purchase agreement while also being stuck paying rent in California because we were prohibited from leaving our apartment! Remember those days? Threats of fines and jail for leaving your home??? We’ve come a long way since then, but the scars remain.
As 2020 continued to unfold, my husband became more and more drawn into the vortex of COVID testing. He was working 80+ hours, seven days a week, grinding away with the team he was on to design, develop, test, validate, get approved, manufacture, and source supplies for their COVID test. (Someday I’ll write THAT story! They thought they were going to save lives by working day and night to get tests out, but all they did was make the feet-dragging C-Suite extremely rich (the only reason we were so behind in available testing was because biotech corporations saw no profit in responding to a virus Fauci had deemed less worrisome than flu). But that’s a story for another time.) In between searching for toilet paper and baking banana bread and cookies to keep my husband’s spirits up; my daughter and I would peruse the internet for homes hoping that someday soon we’d be able to emerge from lockdown and leave California. When you hear or read stories written by scribes for Zillow, Redfin, Trulia, Opendoor, Invitation Homes, the National Association of Realtors (NAR), the Mortgage Brokers’ Association (MBA), et al., you’ll often hear about their “research” showing high demand for homes and how it spurred them into their REO (Real Estate Owned)-to-Rent, iBuyer, brokerage businesses to maximize revenues and create value for their shareholders. That “research” focused their acquisitions on certain locations. I WAS THAT RESEARCH! Well, me and every other person pulling up home listings to find a sliver of hope in otherwise fear-filled bleeding into frustration- and anger-filled days. I performed dozens of searches and clicked on hundreds of homes every week in a handful of states – some of which I had no real intention of ever moving to. Based on my clicks and those of millions of others like me who, unlike Gavin Newsom weren’t out partying with lobbyists during his own frigging lockdown, were stuck at home trying to “flatten the curve”, “protect the essential workers and vulnerable”, and “wait our turn” for a vaccine, based on those clicks, something extra malignant began to infect the already sick housing market.
I first noticed something was off when my searches began returning dozens of empty homes for sale. Questions began to form - “Where did all the people go? Did they die of COVID and their families are selling already? Is it AirBnB-ers offloading homes they can’t rent out anymore due to travel restrictions?” I started looking at the sales history of the homes and was confused to discover they were recently bought and being listed within days or weeks or sometimes months of being purchased. My first thought was, “What’s wrong with all these places that people are unloading them so fast?” It was happening across the US – Arizona, Texas, Minnesota, North Carolina, Florida…all the places I searched regularly.
I’m of the X Generation. I grew up straddling the 20th and 21st Centuries. I can drive a stick, pop a clutch, jump start a battery, put a chain back on a bike, memorize a telephone number and address, write a letter on paper with a pen, program a VCR; and I can transfer my CD collection to my iPod, make Excel my bitch, use a PlayStation, Tweet, create a bootable drive for an older operating system because Apple broke something – AGAIN, and drive a Tesla if I had to – but why would I want to? I was in my thirties during the turn-of-the-century FUBAR that was the early 2000s. My husband and I saw it all from the front row – Dotcom bust, 9/11, housing bubble and epic pop, and 11% unemployment in California…While our younger Y Generation “siblings” were standing in line at Border’s for the midnight release of Harry Potter, we were fighting the real Voldemort.
The more I researched the housing market during the pandemic, the more flashbacks to the 2000s I had. My husband and I earned decent money back then, we had only one child, and yet, we still had to move out of San Diego County up to Riverside County to afford a home in 2004. We couldn’t understand where all the money came from. How were people affording all these homes? We asked each that other a million times as we drove back and forth between home and work and around San Diego to visit with family and friends. In 2004 we’d taken out a conventional, conforming, 30-year mortgage on our home. We didn’t know anything else even existed. In 2006 we sold our home because we just couldn’t deal with the commute anymore and figured it was better to rent in San Diego. But come 2008, boy did we get an education! A friend in Arizona, whose husband was a Real Estate agent, declared bankruptcy. A friend in San Diego, who had a Master’s Degree in Education, had taken out an ARM that was resetting and had to short-sell her home. Our landlords – the husband was a chiropractor – were short selling our rental and not renewing our lease. These weren’t uneducated people – and yet they were losing their homes. Soon even we, as financially conservative and responsible as we are, were caught up in the chaos of what unmitigated greed had wrought. Everything was turned upside down. We’d bought into the lie that if you work hard, pay your bills, and live an honorable life; you’ll get to retire with a pension and Social Security and Medicare and travel to the places you couldn’t afford to while being a good working-class, working-aged American. Because of the greed and malfeasance of Wall Street, Banks, The Federal Reserve, and Government (Sponsored) Entities; my husband lost his job. We were PISSED! We’d played by the rules. We’d been responsible with our finances and still got screwed as the contamination of those toxic loans spread throughout the larger economy. As the con was uncovered and the crooks exposed, we learned a whole new language. Adjustable Rate Mortgages (ARMs), Interest Only Loans (IO Loans), and No Document No Income Loans (AKA Liar Loans). Cash-out Refinance and Home Equity Line of Credit (HELOC) – these explained how everyone we knew was affording $50,000 Hummers, vacations to Bora Bora, and enormous boobies while we took out five-year loans to buy Hondas and cooked meals at home so we’d have leftovers for lunch the next day instead of eating out. We learned about Mortgage Backed Securities, Credit Default Swaps, First Trust Deeds, and Mortgage Churning (something my mother-in-law got into wherein she refinanced her mortgage every few months so her broker could earn the fees and kick back $1200 to her). And we learned about house flippers.
Something about all the empty homes I was seeing on real estate sites in 2020 and 2021 reminded me of the house flippers I’d seen during Housing Bubble 1 (HB 1.0): The Housing Bubble to End All Housing Bubbles. HB 1.0 had supposedly taught us how NOT to act, instead it appears to have inspired a whole new generation of flippers, flippers on steroids. I was seeing numerous listings displaying photos of empty homes and small time frames between the last purchase date and current listing date, and it rang some warning bells. The house flippers of the Aughties bought, remodeled (defined as anything from slapping paint on the walls and putting in new linoleum floors to total remodels involving knocking down walls to open up rooms and installing new kitchens and bathrooms), and relisted within a matter of months – they had to because they were paying a mortgage, property taxes and insurance on the place while also drawing from a construction loan to remodel…They had to get in and get out as quickly as possible with as much profit as possible so they could start their next flip. But the flipping I was seeing during the Pandemic was on a whole new scale. First of all, property records indicated the homes were often listed within days of sales being recorded – sometimes even before. Second, it was obvious nothing was being done to the homes to improve upon their value. The photos of these listings often showed water stains on ceilings, flooring that sported everything from furniture marks and carpet dents to totally damaged-beyond-repair carpet and solid flooring; and holes in the walls from where pictures and televisions had once hung. Third, in each metro area, the same listing agents and brokers kept popping up. Names like Opendoor and OfferPad crowded out the usual Remax, Keller-Williams, Coldwell Banker brokerages and always seemed to have one agent associated with the listings in each county – which is to say, I was used to seeing many different brokerage houses listing homes with many different agents, and now I was seeing only two companies and two agents in each county more often than not. Zillow, I later discovered, was a little more on the downlow - their agents were using their own LLCs and acting as “partners” so until you looked up a certain property to check the owner of record (Zillow) you didn’t know it was a flip, it looked like an independent broker in a sea of Opendoor and OfferPad listings. Over and over, from the Minneapolis/St. Paul metro area, to Charlotte, San Antonio, Phoenix, Vegas, and beyond, the majority of homes I saw for sale were owned by Opendoor, OfferPad, and Zillow. And lastly, the price markups were obscene! Not only had they paid 30%, 50% or more over the comparables (comps) from 2019 for many of these homes (or that much over the 2019 sale of the exact same home), but they expected to gross another 5-50% on the resale within a few days or weeks. And in some cases, months, as if they decided to lock up the inventory for a while to control supply and pricing. Case in point: 2479 Hidden Lake Dr. Woodbury, MN 55125. Bought by Opendoor 1/6/22 for $508,400. Listed 3/11/22 for $652,000. To my eye, there was no reason for the two-month delay in flipping this home. The photos show furniture footprints and original bathrooms – it does not appear as if Opendoor used those two months to perform renovations.
By late 2020, I quit searching to buy a house and just began researching what the hell was going on! Every few days I checked a list of counties and cities to track the homes listed. I started researching the new “brokerage” names I was seeing on a majority of the listings and learned about iBuyers (more later on these “fintech/proptech disruptors”…barf!)
I thought we learned from the 2008 clusterfart that housing was not meant to be a quick-return investment vehicle, but a cherished asset providing long-term security, stability, and comfort. I thought the idea that “housing never goes down” was taken out behind the outhouse, drawn and quartered, and buried…DEEP! I thought the Federal Reserve and investors learned that laziness, greed, and incompetence bite you in the ass. But apparently all we did was double down on the notion that housing isn’t a basic human right, it’s a means of indenture; a modern-day sugar, cotton, or tobacco plantation, or coal mine. Because housing as a commodity is back. BIGLY! It’s risen as a zombie/ vampire hybrid. The Zompire – it hunts, it’s insatiable, and it consumes everything in its path armed with the knowledge it gained during the 2000s and with the unwavering protection of its benefactors.
From January 2005 to October 2005, Ben Bernanke, Neil Barsky, and Alan Reynolds proclaimed there was no housing bubble and people believed them!
In 2009 Greg Ip checked his rearview mirror and wrote, “Countless delusions and mistakes brought on our financial crisis, but none did as much damage as the belief that home prices never go down.”
Yet here we are again. The internet is a constant tsunami of “news” drowning us and pushing chunks of flotsam and jetsam onto our shores everyday – some of the biggest of which are faux-ambergris nuggets of oracle-like predictions along the lines of ‘Why the housing market won’t crash.’, ‘Housing prices won’t go down in 2022!’, ‘The hottest housing market in history shows no signs of cooling!’, ‘We are experiencing a housing shortage CRISIS!’, ‘It’s not a bubble, Dummy!’ all stamped with the logos of the biggest brands in media who are “reporting” what they’ve been told by “experts” tied to the biggest brands in real estate. No one questions the motives or credentials or source data of the “experts”. When Realtor.com and the National Association of Realtors is the source for the “fact” that we need 5 million more homes, it isn’t questioned. When Freddie Mac uses what I call Garbage Disposal Math** to generate an estimated housing shortage (See REO-Rental Investors, Source 18), no one bats an eye. Why??? Why do we not demand proof or at least to see the math? We just accept the narrative that It’s not a bubble, stupid! It’s a housing shortage! because, for some reason, we’ve stopped reasoning.
The argument goes something like this, ‘We can’t be in a bubble because we’re experiencing a housing shortage and banks aren’t making bad loans to buyers. Last time it was a “bubble” because we had too many homes bought by unqualified buyers! Banks have high lending standards now! They’re not just lending to anyone who can fog a mirror! It’s all about supply and demand, Stupid! There’s just not enough supply for all the qualified buyers. Housing will never go down again and employees are making plenty of money; they can afford higher payments!’
Only, they can’t. I’ve watched the “news” stories as mortgage rates have gone up causing a double whammy of absurd home prices compounded by higher interest. Suddenly there are more and more “news” stories about how ARMs offer cheaper alternatives to more expensive 30-year loans, how Interest Only loans are an alternative that will allow buyers to stretch and buy a home, and how HELOC loans “surged at end of 2021”. I fully expect that banks are, right now, quietly having meetings to discuss their definition of ‘higher lending standards’ to keep the party going. And then of course there are the suspiciously placed “stories” wherein some executive from a Wall Street firm that specializes in buying up homes and renting them out to enrich investors declares ‘It won’t crash like last time because most owners aren’t using their homes like an ATM!’ Sure, because all those folks who did cash-out refinances over the last 18 months put that money in jars in the back yard, right? They didn’t buy up EVERYTHING with the equity the pulled out of their homes, right? The $1.2 TRILLION in cash-out refis they took in 2021 alone, the most since 2005, is all fine because it’s not as much as they took out in 2006, right? It’s not a problem. It’s not a bubble, it’s different this time! Housing won’t go down this time. Inflation isn’t running amok, no one is losing their jobs or initiating hiring freezes, and damn, that $15/hour minimum wage is making everyone RICH! Ka-ching!
Here’s the thing though - bubbles, like snowflakes, are unique. No two are identical, but they are all created by the same machinations and they all have the same vulnerabilities. To say something isn’t a bubble just because it’s a different color, shape, size, material, or filled with different gas, is misleading and dangerous.
The “experts” are saying “it’s not a bubble” simply because the game looks different. Just today (17 Jun 2022), Diana Olick popped up on CNBC to explain the difference between Then and NOW. She schooled us on the fact average FICO scores were 699 in 2010 vs. 751 in 2022. Adjustable Rate Mortgages (ARMs) and ARM resets were 13 million and 10 million respectively in 2007, but only at 2.5 million and 1.4 million today. And then she made me laugh. ‘Thanks to the run up in home prices, today’s borrowers have a record $11 TRILLION in “tappable equity”. They can cash out that much money and still have 20% equity in their homes if they need cash flow. It gives homeowners a significant cushion that borrowers didn’t have during HB 1.0.’ So, two things here that still have me chuckling… A) Remember that banks have “standards” now. One of the reasons it’s different this time. They will only lend if you have good credit and can prove ability to repay your loan. If a homeowner finds his/her self in need of cash due to losing a job as we hear daily reports of layoffs and Jerome Powell call for higher unemployment, how are they going to tap that sweet equity, and B) if ONE person in their area sells for below the price they paid on their home + 6% - they are underwater. I’ll explain. Let’s say you buy a home for $200,000. When you go to sell it, you’re going to have to come up with closing costs and a commission for each real estate agent involved in the transaction – usually a combined 6% on the sale price of the home. Let’s say you need to sell within a year after buying your home. You will need to sell it for $212,000 to break even and get out your down payment. Anything less than $212,000 and you’re paying out of your own pocket for closing costs rather than making the buyer pay. Now let’s say your new neighbor just bought their place for $195,000. Due to the mortgage rates going up, more inventory on the market, he was able to set a new, lower comp in the ‘hood. Any buyer worth their salt is going to research comps and tell you to go pound sand with your $212,000 asking price. Real estate agents and their industry shills love to talk about comps and how they drive up prices, but they never talk about the other side of that hill. If buyers start chipping away at the peak, by even a few grand, it starts a rock slide of varying degrees of disaster. Regardless of how different this bubble is, due to how home prices are established (by comparables), the market physics are still the same. Home prices rise and fall based on available funding and people’s feels – and neither of those are in a good place right now.
It’s as if HB 1.0 was a game of Jenga – pull out a stick and place it on top, build higher and higher until it all falls down because the underlying structure becomes unstable, meanwhile, HB 2.0 is a sadistic game of musical chairs. There are ten players and fifteen chairs, but eight of the chairs have been locked away in the closet by the game runners who play a frenzied polka in a darkened room lit only with a single strobe light to distract players from seeing the whole picture. Each time the music stops, one player takes his chair and sits on the sidelines until there are three people running around in circles with no place to park their keisters. No one is talking about the eight chairs in the closet and who put them there.
So, let’s talk about that…
Between 2003 and 2007, we heard over and over, They’re not making land anymore!!! That was the big marketing scheme screamed from every talking head and print scribe. Whereas we supposedly have a housing shortage today, in 2005, it was a land shortage and once all the land was built out, if you didn’t have a portfolio of homes you’d be shut off from access to the lowest rungs of the property ladder and, poor you, you’d have to pay higher prices to gain a foothold. According to “experts”, builders were going to build on every square foot of land from California to Florida – up and down the 5 and 15 freeways and east along the 40 and 10 until the Atlantic Ocean was lapping at gayly painted front doors festooning both sides of the 95. At Enron it was Burn Baby, Burn, in Alaska it was Drill Baby, Drill and in California, Nevada, Arizona, Texas, Florida, etc., it was Build Baby, Build!
Gen X, and many Boomers for that matter, fell for the hype because they thought it was hope. They camped out and stood in line to buy new homes and they jumped to buy existing homes because they truly believed that they could rent them out for enough money to “cover their nut” then sit back and watch while prices just went up forever. They were on the property ladder and it went to INFINITY AND BEYOND! Or as kids these days say, TO THE MOON!
My husband and I were too chickenshit to jump into the chaos. We don’t even like Vegas where at least the machines are rigged to pay out a certain percent of the time; there was no way we were going to cash-out refi our home and pull out the little bit of equity we’d accrued due to area comparable sales driving up perceived values, just to come up with a down payment to buy a SECOND HOME we’d then have to rent out and manage. We had no stomach for bidding wars, and buying new homes only to take on the additional costs of Mello Roos and landscaping the dirt-filled yards. Nope, not for us. We kept our heads down and debated Zune vs. iPod. But we weren’t immune to the psyops being perpetrated by politicians, Wall Street, and their media besties; and we spent many evenings wondering if our friends and family were right – were we stupid pussies for not following their example and becoming property tycoons buying up the Monopoly board.
Fear of Missing Out definitely played a huge role in the financial overindulgences of the 2000s, but it was in a much more protracted way than what we just witnessed in 2020 and 2021. The (social)media driven, viral FOMO of 2021, caused a time contraction. We witnessed the birth of the Meme Stock, the adolescence of the SPAC, and the maturing of the narrative that a housing “crisis” is afoot so we should just accept bidding wars, waived contingencies, and higher prices as a new reality if we want to own a home; and that rental homes are now investments for hedge funds and pension administrators so we should just bend over and accept exorbitant annual rent increases, junk fees, and a lack of maintenance as the new normal. As pundits proclaimed that work from home was permanent and fired up the HOUSING SHORTAGE klaxon, as politicians and the Federal Reserve unleased the unholy trinity of endless free money, seemingly permanent debt payment deferrals, and The Great Resignation which meant people had uninterrupted free time to spend their windfalls buying up limited inventories constrained by production delays due to COVID shutdowns, we managed to do in 18 months what it took arguably ten years to accomplish (from the beginning of the Dotcom bubble to the housing crash) in the past.
As 2021 bled into 2022, as we all waited for 2020 to feel like it had finally ended, a sense of doom and a dream-like déjà vu with regards to housing and the economy in general, infected my thoughts. It felt like the players from the 2000s learned from their mistakes and returned to take a second bite at our throats. The only thing humans seem to learn from history is how to be more awful and to better cover their tracks. But they still leave tracks…
I wanted to know what the hell was going on with the narrative that espoused the notion that we had traveled 180 degrees in ten years. In 2012 our housing market was in such dire straits that Obama invited investors to buy up a tsunami of foreclosed properties for pennies on the dollar and become Wall Street landlords because it was more expedient than helping individuals stay in their homes or become homeowners. (For more perspective on how overwhelmingly vile our political leaders are read Matt Taibbi’s stories in Rolling Stone Secrets and Lies of the Bailout & Secrets and Lies of the Bailout: One Broker’s Story. To my mind, there is a direct line between their decades of cruel malfeasance and the crime, violence, financial suffering, anger, and hopelessness being experienced by working class Americans.) Now, in 2022, we’re suddenly faced with a dearth of homes and need five million more in addition to the nearly one million a year we already build?
We’ve just come off a Pandemic that supposedly killed a million more people than were projected to die in the same period. Due to Trump’s immigration policies and COVID travel rules, we saw our population ‘flatline’ if not decline. So how is it that we have this huge housing shortage the media keeps talking about? The answer, according to “sources”, seems to lay with Millennials – they are all rushing out to buy homes! They are fleeing cities like San Francisco, Los Angeles, and Minneapolis; ditching their apartments and their parents’ basements and buying or renting in the ‘burbs of Idaho, Utah, Colorado, Arizona, Nevada, Florida, North Carolina, and Minnesota so they can pop out a few kids and work from home for Apple, Twitter, Facebook, Uber, and Google. At least that’s the story we’re being sold. But it begs at least one glaring question – if they’re leaving cities, why are rents and home prices in those cities still exploding?
Harken back with me to the ancient times of Autumn 2019 when headlines like “Rental prices dropped for the first time in 2 years – here are 13 cities where you can rent for less than average” (Those 13 cities? Orlando, Austin, Tampa, Charlotte, NC; Dallas, Ft. Worth, Vegas, Houston, Jacksonville, Phoenix, San Antonio, Columbus, OH; and Indianapolis), “Baby Boomers are expected to move out of 21 million homes in the next two decades. Gen X and Millennials won’t want them” (The gist of the story being that between 2017 and 2027 there would be a glut of 9 million homes in suburbs and rural areas that no self-respecting Boomer offspring would want), and “Millennials aren’t buying baby boomer luxury ranches – and it’s a sign of a much larger problem in US the real estate market” (TL:DR Millennials don’t want large homes, they want small, sleek, minimalist homes. They love alternative housing like tiny homes and The Van Life, they don’t want multi-bedroom homes. Poor Boomers are having to steeply discount their homes to unload them.)
How the hell does the plot change so much between November of 2019 and today???? The math seems funky. We had X people and Y houses in 2019 and things were fine-ish. During a pandemic, when we lost population due to healthcare issues and population roadblocks, we suddenly have a different equation where fewer people equals a dearth of housing? Sure, Americans moved around the country and impacted unprepared communities, but where are the vacancies? How are rents across the country universally insane and places like Iowa experiencing bidding wars? What, if anything, is going on???
I decided to pretend I’m an investigator. How would I uncover the facts of the situation? I decided to channel my inner Nancy Drew, Magnum PI, and Julie K. Brown to see if I could answer my own questions.
Here’s what I’ve come up with.
First, I started with numbers.
The question I started with is – Does a difference of 2.1 million surplus homes explain what’s going on in the housing market right now? In theory we have enough homes for every household with over 12 million to spare. Granted these are national numbers – they don’t shed any light on regional or zip code level issues and needs. It’s a big picture question that arguably can’t be answered without both zooming in to look at the local level and investigating the players involved. National housing numbers, whether they be median price, availability, or projections of new units in the pipeline skew the conversation because there are such drastic swings within those numbers when discussing individual states and then the urban, suburban, and rural areas within them. Residents of San Francisco or New York look at Utah and Idaho as insanely cheap places to live, but to a local, earning local wages, it can be cripplingly expensive. Were there plenty of homes in Idaho and Utah to create a healthy housing market until they were invaded by west coasters fleeing mask mandates and school closures? Were there plenty of homes in California, Texas, North Carolina, and Minnesota until they were bought up by a new breed of investors and locked away in a modern-day version of Fisk and Gould’s gold lock up? And are some areas suffering more than others because as a result of their weather, job opportunities, and tourism, they’ve been targeted by competing industries looking to make a profit off shelter? The national numbers were, for me, just a place to start.
I chose to start by assuming that the number of surplus homes in 2020 did not represent a significant enough decrease to warrant a Dearth of Existing Homes Crisis Alert Notice (DEHCAN).
So, what had changed? If I assume that the number of existing housing units were roughly the same on a per household basis between 2010 and 2020, that 2020 housing inventory was not impacted by a sudden huge increase in US population or a catastrophic decrease due to a disaster, then what is different? What is causing this supply problem? Could it be that the game has been rigged and if so, who whom? Have chairs been locked away in the closet?
Before we can answer that, we need to know who the players are:
Some of these players were around in 2010 and some are new to the board.
Right off the bat, we can pop a few bubbles because I don’t believe they add any more to the party than they did in 2010.
The media – they’re equally inefficient in any decade, behind the curve and all too often owned by their “sources” and go-to “expert” economists and influencers (I mean, why does Elon Musk’s opinion on anythingmatter – much less gun control?) Sure, they raise the panic level and fuel the fear with their 24/7 payola clickbait, and they definitely had captive audiences for the last two years as people consumed more and more of their bullshit in lieu of concerts, movies, books, etc. They spread the narrative that we had a “housing crisis” in 2010 because we had too many homes, they spread the narrative that we have a “housing crisis” now because we have too few homes. They shouted about the Housing Bubble in 2010 but poo-pooed the notion that we’re in one now. Remember this time is different. We don’t have risky loans and everyone has plenty of income and equity in their homes because home values have gone TO THE MOON! Housing won’t go down this time. It’s different. They contributed to the accelerated pace of the game because of the nature of the internet right now and because we all sat at home eating news with a spoon while the pandemic mocked us. The media are the DJ, if you will, for our game of musical chairs. They spin the songs to which our game is played. And they set up the laser lights and fog machines to alternately blind us from what’s really happening and provide the shadows from which the party planners operate – but the media didn’t set up the board.
Foreign owners, while absolutely shitty for their penchant of buying up homes in areas we’d all like to live, areas where only so many homes can be built, probably haven’t increased significantly in the last ten years.
Ditto Snow Birds/2nd Home Owners – which isn’t to say they don’t affect the availability of homes in already impacted area, I just don’t believe their numbers have increased enough to be the problem right now.
Mom ‘n’ Pop investors. I could go on for hours, hell, days, about this group. Do we need a supply of long-term rental homes – homes available for 30 days or more at a time? Yes, of course. People are always going to need temporary housing in college towns, after high school and college while they “find themselves”, due to relocations, while needed repairs to their residence are being performed, etc.…but should we just blindly accept that individual investors need to own over 16 million (> 11%) of the total homes in existence? Should they have the right to own such a huge percentage of homes while so many struggle to pay rent, save for down payments, and are shut out of the opportunity to own a home just because Mom & Pop think it’s their right to own the neighborhood? In my opinion, nope. But for my purposes right now, the number of individual investors who own 1-4 single family homes or a single multifamily unit just did not go up enough over the last few years to account for the housing supply “crisis”.
Real Estate Brokers and Agents are definitely part of the problem – but not from the perspective of housing supply. I mean, they’re often flippers and “Mom ‘n’ Pop” rental investors themselves, but it’s more or less on an equal scale to what it was in 2010. They are just, by and large, yucky people. They straight up lie, and when they’re not lying they’re intentionally omitting information. They, in my opinion, control too much of the data and take advantage of the trust people put in them as “professionals”. When a client is only shown cherry-picked comps to use as guidance for an offer, they can get manipulated into overbidding. When an agent pushes for clients to overbid by tens of thousands of dollars or waive contingencies as a way to WIN a home and works with appraisers to delay appraisals until a certain sale goes through just to substantiate a new price per square foot – it just feels like wholesale manipulation to me. They needlessly contribute to the annual increase in prices of homes as buyers have to pay inflated prices so sellers can pay 6% commissions and still net what they want/need out of homes they sell. The whole industry needs to be legally required to be more transparent and less expensive (a sentiment apparently shared by people at the Department of Justice1). It’s obnoxious that an agent can start a bidding war just by having a friend submit a lowball offer no one has any intention of taking to use as leverage against unsuspecting buyers. It’s obscene that the industry is commission based and that buyers and sellers are often manipulated from the shadows by agents who operate in the grey areas of the rules while their industry lobbyists protect them. Buyers and Sellers depend on agents and brokers to provide a professional service but those “professionals” are, in my experience, all too often more focused on closing a deal than doing their fiduciary duty. Sure, there is plenty of room for some accountability to be shared with buyers and sellers who don’t educate themselves about the system and blindly trust real estate agents. It’s time to realize that most “professionals” are only out for themselves – we are nothing but slabs of meat from which they carve chunks, and they’ll carve as much as we let them get away with. If you’re not checking local comps and doing the research before making an offer on a home, you’re taking a big gamble. The days of real estate agents or other “professionals” taking pride in being honest, transparent, and accountable are long past. But, for all their faults and while they’ve cashed in on the absurd increase in housing prices the last few years without actually doing any more work to sell a home (some might argue they’ve actually had to work less hard due to the nature of the market), they haven’t affected the supply side any more than they did in 2010.
COVID: I can’t think of an event in all of history that has had such a gargantuan, simultaneous impact on the world in terms of financial windfalls, population numbers, and societal mindset. The Federal Reserve printed money for the US Government and banks to dole out in such a way as to make Monopoly money look like legitimate currency. COVID contributed to a decrease in population both from the disease itself and the response to it. Many of us will never forget the suicides, drug overdoses, heart attacks, and car accidents that took people who, without the universally bullshit response to the SARS-CoV-2 virus, would still be with us today. Someday there should be a reckoning for the lives lost due to cruelty, incompetence, and ego – but there won’t be because as a society we simply don’t have the fortitude to demand actual change. But the fact remains – COVID itself and the shutdown of services and support systems in response to it, caused more people to die than could have been imagined by even the most gruesome, sadistic actuary. Our response to COVID destroyed lives at our southern border and slammed the gate on the traditional flow of immigrants. COVID also forced a delivery on the promise of technology-driven remote work opportunities that had been touted since the turn of the century but took a pandemic to materialize. Remote work opportunity and fear of various things caused some people to freeze in place due to lockdown laws or uncertainty while others fled hypocritical, scattershot leadership; and still others became ensnared in the ideas of “winning” a home at ‘the lowest rates ever!!!’ Hundreds of millions of people have been hooked on a very powerful drug – hype. They sincerely believe that housing, used cars, meme stocks, salaries, and available jobs will never go down, they believe the Federal Reserve won’t cut off the free, easy, and cheap money supply, and they believe the politicians will pony up to buy their votes in November 2022 and 2024. I sincerely believe they think that since the government bailed out the banks after 2008, they will bail out citizens when the COVID-era debt monster comes to pop everyone’s bubbles. Our leadership used the pandemic to exponentially accelerate a wealth gap and assure indenture for a larger swath of Americans, now and in the future. COVID, and the response to it, caused a near total destruction of common sense and fiscal responsibility, and a universal disruption to the normal ebbs and flows of humanity.
REO-Rental Investors: Real Estate Owned-to-Rent Investors. The brainchild of the Obama Administration. A quick fix for a lazy bunch of posers trying to create the illusion of “doing something” to address complaints of homeowners watching their home values further depreciate as empty houses in their neighborhoods collected cobwebs and backyard pools turned into mosquito-breeding swamps. Instead of focusing on making banks work hard to keep people in their homes or creating opportunities for people to buy now-affordable homes, Obama’s administration and Congress fed the Zompire its first blood-soaked brainz. Obama and his Treasury Secretary, Tim Geithner, ignored the intent of the Home Affordable Modification Program (HAMP) funded by the Troubled Asset Relief Program (TARP) which was intended to modify loans so people could stay in their homes. Instead the HAMP was used to protect banks at the expense of homeowners caught up in a swindle. Nearest I can tell, it went something like this: If you owed $250,000 on your home, your ARM had reset to a point you could not afford the payment, and you couldn’t refinance into a 30-year with a lower rate because you were upside down by $50,000 (the house only appraised at $200,000 due to local comps so the bank wouldn’t loan you $250,000 to pay off your original loan), if all that was true and you were trying your best to keep your house – your bank was supposed to modify your loan! They were supposed to write off part of your balance, reset your interest rate to lower your payment, extend your loan term by years, and help you in some way to become current on your loan so you could stay in your house. But doing all that meant they had to reduce THEIR income, THEIR assets, and piss off Wall Street analysts and those who’d invested in their stocks by taking losses on loans that had been sold on to other investors who bought mortgage backed securities. Rather than hold the banks’ feet to the fire, Obama and Geithner said, I assume, ‘Screw it! We’ll let the banks slow walk loan modifications so they can slow their own financial hemorrhaging.’ Foreclosures exploded, people lost their homes, homes stood empty and taxes went unpaid, and the death spiral of house prices accelerated. By February 2012, when Obama needed some positive headlines for his reelection campaign, he bought them. He killed not one, not two, but three birds with one stone - he sold out American homeowners to institutional investors when the Federal Housing Finance Agency announced their REO-to-Rental Pilot Initiative, turned those investors into political (read: financial) supporters of anyone who pledged to support the narrative that ‘Americans want to be renters!’, and within months bathed in the glow of headlines like “Obama Policies Ended Housing Freefall” ~ Washington Post 26 Sep 2012.
Somehow, in 2012, we had millions of empty homes that needed to be maintained, have their taxes paid, have insurance coverage, and eventually be filled – by renters! Obama couldn’t be bothered to make banks modify loans so people could remain home owners and enjoy the benefits of such, so instead he let banks foreclose then sold off tranches of those foreclosed homes to investors at a huge discount so they could own the asset, avail themselves of the business tax benefits, and make a profit renting them out. Makes total sense, right? Give investors a leg up while screwing the homeowners who just got rogered by, you guessed it, investors!
On August 2, 2013, Marc Courtenay wrote a story for TheStreet.com titled, “Be ready for renter-backed bonds and meet the beneficiaries” in which he seems to try to digest the fact that Blackstone (Invitation Homes) had declared Mortgage Backed Securities (the Evil, like the Fru-its of the Devil, devices of the 2008 meltdown) were for wimps and that REAL MEN bought bonds secured by rents!
By October 30, 2013, Shah Gilani wrote for Forbes “Trick or Treat? First-ever REO to Rental securitization deal looks spooky.” wherein he explains that Deutsche Bank, JPMorgan Chase, and Credit Suisse, on behalf of their client, Blackstone (Invitation Homes), were, at that time, going door to door asking for investors to give them $500 million dollars, securitized by rental income from their portfolio of 40,000 homes; money, I assume, they wanted use to go buy moar homz! Mr. Gilani notes that by this time, institutional traders had already bought more than 200,000 foreclosed homes.
And on September 22, 2014, Ben Lane, via HousingWire.com declared “Single-family rental bonds are here to stay.” and went on to describe the billions in bonds that had already been sold with more to come. He also quoted those in the know at Deutsche Bank, “” The rental space is becoming institutionalized,” (Ryan) Stark said.” And at Bank of America Merrill Lynch, where, according to (Mark) Michael who “citing the difficulty that first-time buyers have obtaining credit and the crush of student loan debt as impediments to homeownership.” said, “”Current conditions bode well for the future of the rental market.””
Digest those words – “The rental space is becoming institutionalized.” And ‘People can’t buy homes because they can’t get credit and have student loan debt.’ They planned to capitalize on the fact they could buy up all the houses and turn them into rentals because our political leadership had financially crippled private buyers.
Then marinate on who the chairman of Donald Trump’s economic advisory council was – Stephen Schwarzman, CEO of Blackstone (Invitation Homes), and who one of his largest donors and the chairman of his inaugural committee was – Thomas Barrack, Jr. CEO of Colony Capital (See the inbred corporation bastard that is Colony Starwood Homes10). My point is, Democrats and Republicans have found common ground on one thing – screwing the American working class for the benefit of their egos, wallets, and reelection campaigns. They’ve collectively sold us out to the lowest bidder who is charging us astronomical prices to keep us poor and in debt – after all, we must have housing and they know it.
Then take in these numbers. Of the current number of homes in the US (~ 142,711,000 as of Q1 2022 per the US Census Bureau) approximately 91 million are single-family homes. Institutional investors own >300,000 single-family homes in the US. The following accounts for ~260,000 of those over 300,000 homes.
Invitation Homes: 81,000 Homes, 16 Markets1
American Homes 4 Rent: 57,024 Homes, >20 Markets2
Progress Residential: >70,000 Homes3, 36 Markets4
Home Partners of America: 17,000 Homes5
Tricon Residential: 35,000 Homes. 26 Markets6
The industry argues that they only own 0.33% of all single-family homes (300,000 REO-to-rent homes/91M Single Family Homes)1. Which may be true. BUT! They don’t own them spread out evenly between coasts and borders. They don’t own one or two homes in each city of all fifty states. They don’t own 6,000 homes per state (300,000/50). Nope. They each own thousands of homes in very specific cities. And they are buying more every month.
For example:
Invitation Homes says they own 12,661 in Atlanta, GA, plus manage an additional 215 “owned by the Rockpoint JV”.7 Total: 12,876 unavailable for purchase by individuals as primary residences in one city.
American Homes 4 Rent says they own 5,498 homes in Atlanta, GA.2
Tricon Residential says they own 1,042 homes in Atlanta, GA6
Progress Residential lists Atlanta, GA as one of their 36 markets but does not break out number of homes owned so we’ll just assign them 1 home.
According to Bloomberg8 there are almost 110,000 single-family homes in the Atlanta area. Invitation Homes, American Homes 4 Rent, Tricon, and Progress Residential account for, collectively, at least 19,417 single-family homes that are not available for purchase. These homes are for rent only. That’s 18.68% of the homes in Atlanta removed from inventory for sale. That’s 18.68% of homes in Atlanta being held for rent to families who face annual rent increases vs. consistent mortgage payments, do not get to avail themselves of tax benefits of ownership or equity building, and are subject to eviction or refusal to renew a lease if the owners decide they want them out for any reason. At least 6.47% of all the homes these institutional investors own are in Atlanta alone (19,417/300,000).
But wait! There’s more. These institutional investors don’t feel they make enough money through rent, they also have special “Ancillary Services”7 they are actively growing. What, you ask, the hell, are “Ancillary Services”? Well, I’m glad you asked…For a “small monthly fee” you can have Invitation Homes’ Lease Easy bundle which includes Smart Home technology (a video doorbell, a smart lock, and smart thermostat) and air filter delivery. Only it’s not optional as far as I can tell – it appears to be “standard” in their lease and runs ~$55/mo. FWIW, I replace my own furnace filters every 8 weeks or so, depending on how many eggplants and how much tempura I’ve fried in this tiny apartment, to the tune of $20 per filter – and I buy the top of the line, pulls-quarks-out-of-the-air filters. I pay ~$10 a month ($120/yr) for furnace filters most people pay $20 A YEAR for! Where the hell does Invitation Homes come up with $660/year in furnace filters (which they have sent from a 3rd party every quarter so I’m guessing four filters a year?), plus three tech baubles they want to install anyway so they can control access to and temperature in the home (and spy on you/screw with your A/C settings?) when it’s vacant.
Invitation Homes projects they will, by the end of 2022, make an additional $15-30 million EVERY YEAR off these ancillary services alone9. And they’re exploring other opportunities in pet programs, pest control, landscaping services, insurance, and energy optimization. Tricon brought in $3.0 million of ancillary fees via application fees, pet fees, smart home fees, late fees, and early termination fees in Q4 2021 – up 42.3 percent from Q4 2020. They have a dedicated ancillary revenue team to “drive revenue growth” in this category.
Even if you can accept application fees of $50/adult, pet fees of $35/pet/mo., late fees of $50, notice fees of $35, and “convenience fees” of $121 each time you use their required payment portal11 - the way I read this, these institutional investors plan to 1) install tech devices in the homes for their own benefit and pass the cost onto their tenants in perpetuity (which is to say, they install a video doorbell, a smart lock, and a smart thermostat when they buy the place so they can remotely control the home then charge for the “feature” to recoup their costs on the units and install of said units AND use them to generate free money from tenants), 2) push maintenance costs usually (legally required to be?) born by landlords onto tenants. Pest control? Landscaping? Aren’t those usually landlord responsibility? Energy optimization? What? Are they going to require the tenants pay the cost to have new windows and insulation installed? It’s all very foggy. And very nickel and dimey.
So, to recap, because I know I do go on... Institutional owners of long-term rentals own at least 18.68% of the single-family homes in Atlanta, GA. According to one story, investors on the whole (usually inclusive of Mom ‘n’ Pops, short-term rentals, REO-to-rent, and flippers) own 43%12 of single-family homes in metro Atlanta. And they have all targeted the same cities – Atlanta, Vegas, Austin, Charlotte, DFW, Phoenix, Orlando, Tampa, Nashville, etc. Hard numbers are nearly impossible to come by, but one can easily imagine that the Atlanta scenario has played out in each targeted city. That’s a far cry from the party line of, in the case of Invitation Homes, “[W]e represent less than 0.5 percent of the total single-family rental market, and less than 0.1 percent of the single-family homes in the entire country.”1 They get their media minions to repeat this narrative over and over until it becomes “truth”. During 2020 and 2021, dozens of stories with headlines like: Blackrock is Not Ruining the U.S. Housing Market (by Derek Thompson), and Wall Street isn’t to blame for the chaotic housing market (by Jerusalem Demsas) were written and appeared in mainstream outlets like, in these cases, The Atlantic and Vox respectively. The authors declared that investors like BlackRock (a current investor in Invitation Homes which was established by Blackstone which has since sold its interest and invested in other REO-to-rental companies) are saving homes from disrepair and we’re short millions of homes! Apparently, The Atlantic has had a change of heart from 2019 when Alana Semuels wrote a piece titled, When Wall Street Is Your Landlord and explored the origins of the REO-Rent industry including the fact it was government created and sponsored by way of Fannie Mae which provided a $1-Billion-dollar loan guarantee to add some torque to the project. Alana exposed the dark side of their greed as it pertains to the people forced to become renters of squalid homes because there are no houses to buy because investors have bought up entire neighborhoods targeted for the nearby good schools and other amenities (you know, the places people WANT to live in) while they pursue a profit-driven approach to repairs – which is to say, repairs cost money so just fix it yourself with some duct tape and silly string you pathetic renters! Even the Washington Post is at war with itself. In December of 2021, Peter Whoriskey wrote a piece titled, This block used to be for first-time homebuyers. Then global investors bought in. He explains the phenomenon of entire neighborhoods being gobbled up by Pretium Partners’ Progress Residential and the havoc it’s wrecked on working class Americans just trying to keep a roof over their heads. Meanwhile, on what seems like a weekly basis, they publish “perspective” pieces by Mark Zandi clanging on about a “housing shortage.”23 He says our obscene inflation is being driven by “the housing shortage.” He doesn’t even question it. It’s just fact. He’s an economist, an expert. In 2021 there was a huge push to just trust the “experts” and just build moar homz17, 18, 19, 24, 25, 26, 27!
And, oh by the way, build those moar homz as rentals! That’s right, these “experts” and REO-to-rental investors are contracting directly with builders like Pulte (Invitation Homes has a deal to buy 7,500 homes straight from Pulte in guess where – Florida, Georgia, Southern California, North Carolina and Texas; some of the hardest hit locations with regards to the “housing shortage”14), DR Horton15, et al. to buy up new homes being built and lock them up by sending them directly to their rental inventory. The investors are aided in their quest to turn us all into renters by “journalists” who write headlines like, Big landlords jump into the homebuilding business as demand for single-family rentals surges. The “journalist” implies that we all are demanding to be renters instead of recognizing we’re being FORCED into rentals because a handful of people control huge swaths of the housing market. “Journalists” like this give rise to narratives like, ‘Millennials want to be renters!’, and ‘We’re having a housing shortage because environmentalists, NIMBYs, and progressive politicians won’t let us build moar homz!!!’
And even when a team of researchers comes out and says, as recently as May 31, 2022, ‘Hey, um, housing prices seem to be incredibly overvalued in some areas. You might want to take a beat and think about whether or not you’re being manipulated into becoming a debt serf for housing speculators and SPAC investors.20’, the journalist who published the news on June 10, 2022, called up some local real estate brokers – whose entire livelihood depends on the continuation of the housing bubble – to add a healthy dose of Realtor Logic☺ .
“Demand in the Triangle is still far outpacing supply.”20
“Prices are continuing to rise and we are still experiencing multiple offers on ALL (emphasis mine) resale listings.” 20
listings” 20
future.” 20
“Overvalued is an interesting descriptive for an appreciating asset. Gas is overvalued at 50% increase and you only get to use it one time. House prices have doubled in most Triangle areas and so have gas prices.” 20
“Our area is in such high demand. I do not believe houses are going to depreciate. This is the new norm.” 20
“The new jobs in the Triangle are bringing much higher salaries.” ‘…there are only about 3,000 homes currently available in the region but an estimated 32,000 high-paying technology and life sciences jobs expected to be added to the regional economy over the next decade which will…’ “produce sharp increases in prices for the foreseeable future.” 20
Buy now before you’re priced out forever!21 Meta is coming to Durham and going to cause real estate prices to double again in 5-10 years.22
The answer is obvious. Either expect to pay double because house prices will never go down or build moar homz – your choice humanz!
So, let’s say we build more homes to accommodate all those Meta employees with ‘high-paying technology jobs’. Let’s say we agree to level the forests of the Amazon and the northwestern part of North America for lumber, let’s say we destroy vast swaths of animal and plant habitat in places like North Carolina and Southern California for housing plots…guess what, you still won’t be able to buy a home. We losers don’t even get a shot at the American Dream of owning a home, we’re shut out before they’re even built because they will never hit the market, all because investors have A) politically-guaranteed access to easy, cheap money that we peons do not, B) media shills on speed dial who just print what they’re told by “experts” and “insiders” and “sources” who plant stories for the benefit of their own objectives – these “journalists” with degrees from Columbia, Harvard, etc. never question ANYTHING, they’re just scribes, and C) been given a mandate to grow, baby grow by Wall Street, politicians, and the Federal Reserve who all expect our economic bubble to expand by 2% every 12 months!
Imagine, if you will, a human being who never stops growing. Either due to diet or disease they continue to grow upwards and outwards every day of their life. Sure, there’s normal growth from infant to early-twenties, but then the body, if it’s functioning correctly, shuts down the growth because frankly, people who don’t stop growing die younger than their peers. Their organs cannot withstand the continued growth. Hearts, lungs, kidneys cannot handle the strain of constant growth past a certain point. Our economy is a living organism, a fact proven very recently by the world-wide reaction to the COVID pandemic, but also proven over decades as we faced World Wars, Civil Wars, Wars of Rebellion, and the like. The economy’s organs can’t sustain normal life when they’re subjected to a constant binge-and-purge rollercoaster that’s intended to keep the system growing forever.
Meanwhile…Back to our regularly scheduled programming…In the Minneapolis metro, investors own about 4% of the single-family homes, double what they owned in 2006; and in six neighborhoods they own more than 20% of the single-family homes – all are intended to be rentals12. The Federal Reserve Bank of Minneapolis has created a database to track entities that own two or more properties because of the rise in investor-owned housing. “Invitation Homes and Home Partners of America each…own more than 800 homes in the metro.”12
‘In the third quarter of 2021, real estate investors spent a record $63.6 billion (up 78% from the previous year) buying up 90,215 homes (up 80.2% YOY). Real estate investors made up 18.2% of home purchasers across the U.S., but in places like Atlanta and Charlotte, they represented 32% and 31.5% of buyers respectively. Single-family homes were 74.4% of the total investor purchases, while condos were 16.9%, townhouses were 5.4%, and multifamily buildings were 3.4%. Close to 100,000 build-to-rent homes will have started construction in 2021.’13
Unpack that for a minute. Germinate on the numbers, including that bit about 100,000 build-to-rent homes. We’re building the homes they say we need, but we’re building them to become RENTALS! It pretty much destroys the argument that ‘investors are saving homes from rotting’ when you realize they’re building brand new homes to lock them away as rentals!
And they are planning on buying up more and more inventory. Tricon has a stated goal of owning 50,000 single-family rentals by 2024 with 8,000 purchases in 2022. At one point in 2021, Progress Residential was buying 2,000 homes a month and expected that number to go up. And Invitation homes acquired 696 homes in Q1 2021 for $233 million with a stated goal of $1 billion in acquisitions for that year alone. Using $233 million paid for 696 homes, I calculate $334,770 paid, on average, per home. Extrapolating from there, I assume they intended to buy about 3,000 homes in 2021 ($1 B/$334,770 per home = 2,987 homes), so by now, they could be well over the 81,000 homes they reported owning in June 20211.
Their market share is intended to grow. They are, in my opinion, cornering the rental market in some cities, which one could argue means they have the power to manipulate rents as well as force people to become renters by preventing them from becoming owners. Remember these words from earlier – “The rental space is becoming institutionalized.” And ‘People can’t buy homes because they can’t get credit and have student loan debt.’? It begs the question – was that the plan all along? Was it their plan to manipulate the purchase market with all their cash offers over asking price to price out private buyers who couldn’t qualify for big enough loans due to debt-to-income ratios? Was it their plan to “institutionalize” the rental space for investor return to fill the void left by the collapse of Housing Bubble 1.0? And it’s not enough for them to control the rental market – they also need to earn and grow “ancillary” income. Because, don’t forget, they created and sold bonds secured by rental income AND they are publicly traded companies who must, even if just for the benefit of their own personal stock options, pump up share prices.
We as a society are allowing investors to treat housing, a basic necessity, a human right, as a service or commodity. Housing has become something akin to a cruise ticket or dinner out, or a Keurig coffee machine or sports car – something we have an option to forgo if our budget or scruples won’t allow it. We can’t just decide to cut housing out of our lives because it’s too expensive! And we shouldn’t have to live warehoused in tenements, projects, or the stupidly-named Accessory Dwelling Units (ADU), without privacy or dignity or the ability to save money, just because a select few want to profit off our need for housing. When anyone speaks about affordable housing or implies that housing as a commodity is a bad idea, the media leaflets the internet with reasons why housing can never go down and people are grateful just to be able to rent. It will destroy the economy if housing goes down! Think of the pensions! Everyone, from Millennials to Boomers, WANT to rent! We’re providing a service and people are grateful to us! Without us providing rental homes, more people would be homeless because they can’t afford homes! Anyone who’s studied history will recall that Europeans raised the same repulsive arguments over slavery. How can you even think of shutting down the slave trade? You’ll ruin us! We’re saving the ‘African heathens’! How will you get your sugar, cotton, and tobacco at reasonable prices if we have to pay wages to farm laborers? Everyone wants our wares, we’re providing products and services. Without us all of Europe will be homeless and think of the poor Africans we’re saving from ‘savagery’! There was still is a belief that it’s okay to abuse an entire segment of society so that aristocrats, slave traders, plantation owners, merchants (politicians, investors, bankers, and C-suite employees) can benefit politically and financially.
It was nauseating to read the investor presentations and annual reports on these companies’ sites. They note that “Homeownership is increasingly out of reach”6 and that millennial home ownership is in the toilet versus boomers at their age. GEE I WONDER WHY???? They are “Targeting the Middle-Market Demographic and High-Growth Sun Belt States”6 – forty-year-olds who make $70-100K are their bread and butter so they are buying up all the homes in popular areas so that those demographics are forced to rent instead of having the option to buy. And while doing so, they are driving up prices and reducing for-sale inventory that crushes the, according to their own numbers, 28.1 million renters who make <$70K a year and by their definition suffer from higher employment volatility and eviction rates. They brag about their portfolios and how they’re in their competitors’ markets. According to Tricon’s published data, they along with Invitation Homes and American Homes 4 Rent have all descended on the Southwest, Southeast, West, Texas, and Florida. They have not spread the pain across the nation, they’ve targeted the same cities. And they are projecting blended rent growth (the combination of new rental contracts and renewals) of 7.8%, 8.4%, and 7.8% respectively16. Noodle on that. Your rent is $2000/mo, you’re trapped as a renter because there are no homes for sale because your landlord bought them all, and your rent goes from $2000/mo in one year to $2160 the next and $2,332 the next. Your wages go up, what, 3% on your average $90,000 income? That’s $2,700 a year before taxes (say $2,295 after taxes assuming 15% tax rate), and your rent went up $1,920 in year one. You get a grand windfall of $375 from your raise for the whole year!
And they’re banking on a wave of Millennials and Gen Z to sustain this investment vehicle. It’s in their investor presentations7. They have their eyeball on 20- 34-year-olds as their future turnips to squeeze. They’ve done the math on “Potential Future Demand” and are creating that demand by locking up the gold houses inside their own portfolios.
2 American Homes 4 Rent. Annual Report. Item 2. Properties as of 31 Dec 2021. (Homes includes 659 classified as held for sale. 7,366 of Homes are in 15 markets, while 48,999 are in 20 markets.)
3 The Washington Post. This block used to be for first-time homebuyers. Then Global investors bought in.Woodman, Spencer; Gibbs, Margot; Whoriskey. 15 Dec 2021. Online.
4 Progress Residential Web Site. February 2022.
5 Businesswire. Blackstone Real Estate Income Trust to Acquire Home Partners of America. 22 Jun 2021. Online.
6 Tricon Residential Web Site. May 2022. 2021 Annual Report and Investor and Analyst Day 2022 Presentations.
7 Citi’s 2022 Global Property CEO Conference presentation. Invitation Homes Web Site. February 2022.
8 Bloomberg. Buckhead Fights Atlanta’s Multifamily Housing Push. Mock, Brentin. 22 Nov 2021. Online.
9 REIT Week: 2021 Virtual Investor Conference/June 2021 Investor Presentation. Invitation Homes Web Site. February 2022.
10 Housingwire. Colony Starwood Homes rebranding as Starwood Waypoint Homes. Lane, Ben. 19 Jul 2017. Online.
11 New York Times. A $60 Billion Housing Grab by Wall Street. Mari, Francesca. 4 Mar 2020. Online.
12 StarTribune. National investors are snapping up Twin Cities area houses to rent. Buchta, Jim. 4 Dec 2021. Online.
13 Housingwire. Investors spent a record $63B to buy homes in Q3. Furlan Nunes, Flávia. 15 Nov 2021. Online.
14 The Dallas Morning News. Dallas’ Invitation Homes teams up with builder Pulte for thousands of new rent houses. Brown, Steve. 26 Jul 2021. Online.
15 CNBC.com. Big landlords jump into the homebuilding business as demand for single-family rentals surges. Olick, Diana. 10 Jun 2022. Online.
16 Tricon Residential Web Site. Investor Presentation May 2022.
18 Freddie Mac. Housing Supply: A Growing Deficit. Khater, Sam. 7 May 2021. Online.
19 CNBC. America is short more than 5 million homes, and builders can’t make up the difference. Olick, Diana. 14 Sep 2021. Online.
20 WRALTechWire.com. Raleigh, Charlotte homes among most ‘overvalued’ in U.S., report finds. Parker, Jason. 10 Jun 2022. Online.
21 WRALTechWire.com. Thinking about buying a house? Do it now as costs keep soaring, economist says. Parker, Jason. 19 May 2022. Online.
22 WRALTechWire.com. Meta coming to Durham: Real estate prices could double again in 5-10 years. Krueger, Sarah. 7 Jun 2022. Online.
23 Washington Post. If policy makers are serious about tackling inflation, they need to address soaring housing costs. Parrott, Jim & Zandi, Mark. 31 Jan 2022. Online.
24 CNBC. America is short more than 5 million homes, and builders can’t make up the difference. Olick, Diana. 14 Sep 2021. Online.
25 USA Today. Housing shortage: 5 more million homes needed for supply to catch up to demand. Frankel, Matthew. 24 Sep 2021. Online.
26 Washington Post. Shortage of homes for sale continues to plague housing market. Lerner, Michele. 18 Nov 2021. Online.
27 Wall Street Journal. US housing market needs 5.5 million more units, says new report. Friedman, Nicole. 16 Jun 2021. Online.
Short-term Rental Investors: AKA, Airbnb, et al., hosts. Airbnb was born circa 2008, it toddled its way along and by 2019 had found its footing as a housing zompire. The story goes, the founders wanted to rent out rooms in their homes to earn extra money…but it grew to include whole house rentals and an investment industry centered around buying homes and renting them out in their entirety as short-term rentals (STRs). Data about short-term rentals is thin on the ground. In a 2016 article1, an Airbnb spokesman referred to a Community Compact and by-city data dashboards in response to umbrage taken in regards to the author of the story commenting to their more-than-opaque data on ‘commercial listings’ (AKA Whole-Home Rentals). The page links to the compact and the dashboards provided in the story are dead. Perhaps they’ve been moved? I can’t say for certain; but I can say, I’ve not been able to find concrete data on commercial listings vs single rooms for rent on their site. But it’s possible to piece together some of the picture by reading numerous sources, and that’s what I present below.
In 2015, there were 550,000 Airbnb listings in the US3. According to FiveThirtyEight1, between June 2015 and May 2016 there were 91,200 active listings across the 25 largest American markets. Those markets represent the usual suspects when it comes to travel – beach cities like Honolulu, San Diego, Orlando, and Miami; tourist mega-hotspots like Los Angeles, New York, Vegas, San Francisco, Boston, New Orleans, and Washington D.C.; and the rest represent what I consider to be sports and conference hotspots – Atlanta, Seattle, Denver, Dallas, Chicago, Phoenix, and the like. The point is, the short-term rental investors are targeting the exact same areas as REO-rent investors because that’s where the action is. Of those 91,200 active listings, 9.7% were commercial listings which again means the whole house was up for short-term rent, not just a spare bedroom. But even that 9.7% is misleading because it’s an average. In Honolulu for example, there were 1,400 active listings of which 21.1% (295 homes) were commercial listings – more than double the average of 9.7%. Commercial listings, meaning those homes were unavailable for residents to live in unless, and this does happen occasionally, the residents of the home decided to move in with family or friends for a week here or there and rent their home out for a few days – but in my experience, that is the exception, not the norm. In New York City, there were 30,600 active listings and 8% (2,448) were commercial. And in Atlanta, our case study from above, there were 1,300 active listings, 8.9% (115) of which were commercial.
Now let’s fast forward a bit. By 20179, Airbnb had 660,000 listings and today there are at least 750,000 active Airbnb listings in the US2. If Atlanta represented 0.24% (1,300/550,000) of the total US listings in 2015, let’s suppose that they represent the same share now… 750,000*.24% = 1,800 short-term rentals in Atlanta, of which 8.9% (160 homes) are commercial. That’s, at best, 160 homes off the market for buyers because landlords want to rent them to travelers. Only that’s not the true picture because short-term rental owners have not increased their market share at a constant rate, they’ve done so exponentially. According to a recent story in The Atlanta Journal-Constitution4 there are anywhere from 7,100 listings (per AirDNA) to 9,500 hosts (per Airbnb) in the metro Atlanta area and “[r]oughly one-fifth of the listings are managed by people who take care of six or more properties.”
So, let’s be generous and say the percent of commercial listings remained for Atlanta (I doubt it, but I’ll play fair since I don’t have real data.) Let’s assume AirDNA’s 7,100 listings in Atlanta and that 8.9% of them are commercial…That’s 632 homes. Poof. Gone from the housing market – not available to buy OR to rent long-term.
San Diego County is a hot mess of city-level regulation and the usual excuses as to why transparency and regulation are sooo hawddd! But I’ve been able to glean the following for you to consider. This area is my hometown so the detail may be of little interest to you, but it’s important to understand because the details are where the suck really come alive.
The City of Oceanside has 66,472 homes. Their rules require STR operators to register as such, and they require some operators to obtain permits. Permits are only required for non-hosted properties. That implies that of the 900 registered STR operators in the city, the 517 who have permits because they are un-hosted whole-house rentals are the only whole house rentals in town. ‘That’s only .78% of the housing in the city,’ you rationalize. Not great, I mean, those are 517 houses people can’t live in so must live elsewhere and commute in for jobs, school, etc. But who cares, gas and cars are cheap, right? But it’s not just 517 homes, because Oceanside carved out an exception for homes in gated communities with 24-hr security! There are dozens more homes that are whole-house rentals because they fall into that exception! Prime example? Condo units at 999 W. Pacific St.
Heading south to Carlsbad we learn that there are 257 licenses as of 2018 out of 47,885 homes in the city. That’s it. That’s all we know. We have no idea how many STR investors aren’t licensed or how many of the licensed are whole-house rentals. Sunlight goes to Carlsbad to d
Encinitas? 26,394 homes, 436 permitted STRs and no disclosure about whether they are whole-house or hosted guests renting a bedroom for the weekend. But even if we gave them the benefit of the doubt and said it was the same as San Diego’s percent of commercial (whole-house) STRs back in 2016 – 8.4% - that’s still 37 homes off the market because they are now private hotels.
Poway, Ramona, Lakeside? They don’t really share data, but per Airbnb’s own listings, on any given day there are 59 whole-house rentals between the three cities.
City of San Diego? There are 540,000 housing units – apartments, condos, townhomes, trailers, etc. It’s estimated that there are 12,300 commercial (whole-house) rentals in the city. That means 2.28% of homes in the City of San Diego are sitting empty, on average, ~50% of the time (more on this below8) so that investors can run private hotels. Why estimated? Because, my guess, they’ve stuck their heads in the sand and decided to promote the idea that we have a housing shortage CRISIS rather than risk irking their real estate investor-class of campaign donor overlords. They don’t want to know what’s going on when it’s so easy to just jump on the bandwagon of the moment – HOUSING SHORTAGE! They finally got around to listening to their constituents who’ve had enough of parties, trashed houses, noise, and a lack of housing and passed a city ordinance to regulate commercial STRs to 1% of housing (5,400 units with a carveout for Mission Beach because a bunch of really rich people own vacation rentals there and don’t want their Ferrari slush fund to go away ‘they’ve always been a vacation rental town and it wouldn’t be fair to tourists and local businesses’. It was signed into law in April of 2021 and supposed to take effect this July. They had fifteen months to get their ducks in a row in anticipation of the Coastal Commission approving the law (don’t ask). They had fifteen months to develop a plan and have it ready to launch. But now it has been put on hold because it’s too hawd to do stuff!10 (Read: Comic-con, Del Mar Fair, Del Mar races, etc. happen over the summer and our mayor is a wuss who only cares about kowtowing to his business donors at the expense of we losers who do all the actual work! You want to live AND work in San Diego??? Too bad, loser! It’s not the mayor’s fault you were born too poor or too recently to be able to afford a short commute! Move to Riverside County and commute down to San Diego, sucker!)
Then there’s Las Vegas. It’s estimated that there are 6,00012 to 16,00011 commercial STRs in Clark County out of the 899,870 homes in Clark County. ESTIMATED! In a county where short-term rentals are BANNED12!!! How do you, as a county or city leader not DEMAND to know how many homes are being held off the market so that tourists can avoid paying occupancy taxes12 while your own residents are facing crippling rent raises14, eviction, and homelessness? Sure, the state finally got around to doing something, but now it’s up to Clark County to craft and pass a law that meets the requirements of the state law13…How long will that drag on?
And my guess, it’s probably worse than that given stories like these found in the Minnesota StarTribune from January 21, 2021 – Minneapolis cap on short-term rentals upsets operators, developers wherein we meet one Anthony Aguirre who left his corporate job to manage his, wait for it…EIGHT vacation rentals full time. And Mr. Aguirre isn’t even the biggest controller of STRs in Minneapolis, nope looks like that honor goes to Sonder Corp. Per a different StarTribune story from July 16, 2019 titled Developer agrees to scale back short-term rentals at Minneapolis complex we learn that due to an “increasingly competitive – and uncertain – time in the rental market” the developer of a 122-unit apartment building had signed an agreement with Sonder to lease them 94 of the units so they could sub-lease them as short-term rentals – via Airbnb according to their wiki page. The deal miffed the neighbors, the City Council got involved, and the deal was dropped to 25 of the 122 units. 25 units just poof, gone… Gee, I wonder what that does to long-term rental unit supply and rent prices. Minneapolis residents got screwed because 20% of all the units in one building were turned into STRs because the developer signed a 5-year lease agreement with Sonder because the rental market in 2019 was “uncertain”. Remember that from above? Remember when in 2019 rents were ‘dropping’ yet somehow today we have spiking rents and a rampant housing shortage after closing our borders and excessive deaths due to the pandemic? Something stinks.
And in case you’re thinking these types of stories are just one-offs, here’s another…this time out of Charlotte, NC, another hotspot for housing “investors” of all stripes. Charlotte leadership is finally getting around to thinking about thinking about doing something about the housing situation in town and one area they’re talking about tackling is STRs of which there are at least 3,170 active rentals in town. Of those 3,170, 23 are owned by one man. He built them starting in 2019, an entire neighborhood of 24 single-family homes (he lives in one hence the 23 STRs) and rather than sell them, he’s locked them away as STRs.5 How did we go from “…had trouble finding buyers” when the homes were built circa 2019 to now when we’re short 5.24 million homes6? I smell cow patties!
'But people need STRs,' you scream at me! Do they? DO THEY??? Did hotels suddenly become full and we needed STRs to absorb the overflow? Nope. Maybe people like the convenience of having a full kitchen and a washer and dryer while they spend three days at Comic-Con, I dunno, I’m still creeped out by the numerous stories of Airbnb hosts setting up spy cams in their homes…No one NEEDS an Airbnb!
Let me ask you this…According to one source7, Millennials make up 60% of Airbnb users. And according to another source8 the occupancy rate of all these STRs is, at best, 65.4% (Hawaii) and at worst 37.2% (Mississippi). Atlanta didn’t make the top 15, but California at 52.9%, North Carolina at 49.1%, and Nevada at 48% occupancy did. Millennials are arguably currently the most crushed in terms of affordable housing availability – from rents and related fees to purchases prices and the related interest rates going up; from inflation eating their wages long before they can even think about socking away money for a down payment to buy a place…they are getting the worst of this crap-dipped-stick beating. How do they feel about vacationing themselves out of the ability to own a home? How do they feel about the fact a home they could own in some of the supposedly most house-drought plagued areas, is sitting empty 50% of the time so some guy can make bank on it the other 50% of the time?
The answer, I’m told, is, JUST BUILD MOAR HOMZ!
2 Harvard Business Review. Research: Restricting Airbnb Rentals Reduces Development. Bekkerman, Ron. Et al., 17 Nov 2021. Online.
3 AirDNA. 2015 in Review: Airbnb Data for the USA. 7 Jan 2016. Online.
4 The Atlanta Journal-Constitution. Short-term vacation rentals in Atlanta now need a permit to operate. Fewer than 3% have one. Capelouto, J.D. 4 Apr 2022. Online.
5 Charlotte Observer. NC Court ruling, public concerns, could force Charlotte to revise short-term rental rules. Rago, Gordon. 25 Apr 2022. Online.
6 CNBC. America is short more than 5 million homes, and builders can’t make up the difference. Olick, Diana. 14 Sep 2021. Online.
7 Stratosjet.com. 2022 Airbnb Statistics: Usage, Demographics, and Revenue Growth. Deane, Steve. 4 Jan 2022. Online.
8 Medium.com / @alltherooms. Ranked: U.S. States by Airbnb Occupancy Rate, ADR and RevPAR. AllTheRooms. 28 May 2019. Online.
9 BusinessInsider.com. Airbnb now has more listings worldwide than the top five hotel brands combined. Hartmans, Avery. 10 Aug 2017. Online.
10 San Diego Union Tribune. Summer’s Coming but San Diego isn’t ready to start regulating short-term rentals as planned. Weisberg, Lori. 27 Jan 2022. Online.
11 Fox5Vegas.com. Clark County releases proposed rules for short-term rentals. Fernandez, Alexis. 27 Apr 2022. Online.
12 Las Vegas Review Journal. Clark County’s ban on short-term rentals failed. Enter regulations. Johnson, Shea. 27 Jun 2021. Online.
13 Nevada Current. Clark County seeks to tame short term rental beast, protect neighborhoods. Gentry, Dana. 16 Mar 2022. Online.
14 KNPR.Org. Rent is still skyrocketing in Las Vegas. What are county leaders doing about it? Green, Zachary. 11 May 2022. Online.
iBuyers: If REO-to-Rent investors are the ancient, more powerful and learned of the housing Zompires, and STR investors are the rebellious rabble rousers who don’t want to live by the Old Ways, then iBuyers are the little shithead punk n00bs who think they know how stuff works but end up eventually getting their ass handed to them while making life impossible for everyone else. They’re the bloodsucking brain-eaters who got turned the night of their Skull and Bones initiation and think they’re immune to everything – including accountability.
So, what exactly are they? Supposedly the “i” stands for “instant” or “internet” depending on which shill they have writing the story. They are marketed as “disruptors” and “fintech experts”. Fintech supposedly means financial technology which is just a bullshit way of saying ‘I’m gonna design an app for you to apply for a loan from your phone while driving your tablet on wheels to the juice bar wearing your yoga pants.’ I don’t really care what all the grammatically-annoying millennial-speak stands for or even means in their meme-thesaurus – the bottom line is, iBuyers are industrial flippers whose sole reason for being seems to be hyping a solution desperate for a problem to, nearest I can tell, perpetrate a pump-n-dump stock scam. I’ll explain.
Your average private flipper buys a home, gussies it up, and puts it back on the market a couple of months to a year later at a higher price to account for all the wood-like vinyl flooring and new appliances they’ve installed. It’s not my favorite racket, but it does offer a convenience (albeit at a premium) for people who don’t want the hassle of changing out old flooring and dishwashers or knocking down walls to create those “open floor plans” and man caves every HGTV-watching property hunter wants, so it is what it is.
iBuyers with names like Zillow, Redfin, Opendoor, and Offerpad took the flipper business model and removed, in my opinion, the most valuable part of it – the refurbishment. You’ll hear some of them say they’re ‘freshening up the home’ but I’ve yet to see any of the iBuyer flips that have done that unless you consider running a vacuum over used carpet a ‘freshen up’. They claim over and over in their marketing spiels that they’re offering two services – A) a cash offer to the seller without the need to stage and show their homes, and B) they handle any repairs before reselling.1
Repairs are not remodeling or even refurbishment, at least not to me. Repairs, to me, are fixing broken things – windows, railings, toilets, handles, appliances, light fixtures, etc. found during inspections. Normally, sellers either agree to fix a punch list of things, credit the buyer to fix them themselves, or the deal falls apart because the repair requests have soured the deal (I’m thinking of big things like cracked foundations, rotten roofs, etc.) But not iBuyers. From what I’ve read, they use an algorithm to determine a “fair” price for your house and make you an offer – usually without even seeing the home. If you accept, they send out someone to inspect the home and tell you to credit them back $X.XX at closing for the repairs they supposedly need to make.1 At this stage I’d ask, “And how do I know you ever make the repairs???” This just feels to me like a nickel and dime show where they say, ‘We need to replace X, Y, & Z so credit us $10,000 at closing.’ and you as the buyer are already in for a penny so go in for the whole pound not realizing it’s just a way for them to pad their profits – they have no intention of replacing the janky acoustic tiles in your basement…At least they never are in the iBuyer listing photos I’ve seen. I mean, if they were going to replace them, wouldn’t they put their best photos forward?
iBuyers claim that they are making it easier for home sellers to sell by offering them cash deals (no worries about private buyers’ loans falling apart) and flexible closing dates (quick or longer closing as needed). That may be true – but at what cost?
It’s unclear how happy sellers who used iBuyers are, but given that Opendoor, arguably the largest of the remaining iBuyers, was investigated by the Federal Trade Commission for “inaccurate and/or inadequately substantiated”2 advertising as it relates to the amount of money sellers can make using them vs. putting their homes on the open market, I can only assume there are a few sellers who complained and got the FTC’s attention. Apparently, they also got the attention of the North Carolina Real Estate Commission because in North Carolina, two brokers were given twelve months of probation while Opendoor itself was given eighteen months for “using false advertising [on] several properties”.3 I await a story from Matthew Goldstein from the New York Times as a result of his FOIA request to the FTC in January 2022 asking for any complaints received4. And yes, I know, people complain about real estate transactions all the time…maybe this is a nothing burger?
But here’s my main beef. iBuyers have inserted themselves into the homebuying transaction, providing a service no one asked for and driving up home prices too quickly in the process. And I don’t even think they did it to make money on home sale churn – I think they did it as a pump and dump stock scam. Again, I have no proof, just an impression based on what I’ve observed.
Historically, to me, a pump and dump stock scam involves intense media hype around a “new” idea then there’s an IPO or new issuance of shares that nets huge profits for early investors and the “founders” while a few short weeks, or sometimes just days later, the stock craps out. The hype is generated by celebrity investors and strategically-planted “journalists” who talk and write ceaselessly about the benefits of the product or service – AKA, the warm and fuzzies the founders and investors want to spread. They talk about how their customers will succeed along with them and everyone will sing campfire songs together. They create shiny, colorful presentations about “growth” and “inclusiveness” and “giving back” and banks jump on board to help them take their show on the road to convince investors to buy their shares on IPO day. I give you WeWork as an example of this circus. Then IPO day comes, the shares spike, and then the shares crash – because at the end of the day, the company only sells hype; and hype, like farts, dissipates quickly or burns up immediately if anyone holds an investigatory candle too close.
The housing market was broken as 2019 drew to a close; it had been for years. Real estate agents and brokers have been manipulating the system for their benefit for decades. REO-to-rent investors have bought up the affordable housing to control rentals and squeeze profits out of the working class à la Apple and the book publishers in the early days of the iPad. Short-term rental investors had been sucking up significant portions of homes to use as holiday rentals for years. And iBuyers had fired up their industrial flipping operation in guess where – the same exact cities targeted by STR and REO-to-rent investors. Charlotte, Minneapolis, Denver, Tampa, Orlando, Phoenix, Austin, Dallas, San Antonio, Atlanta, Southern California…Their market lists are identical to the most popular Airbnb spots and REO-to-rent targets. And then of course, 2020 happened. And 2021. A broken system, limping along but still basically functioning for the benefit of buyers and sellers, was torn limb from limb, gutted, and set on fire.
Think about it like this. Auto dealers. They universally suck. They drive up car prices with their greedy middle-man bull crap. They have to take their pound of flesh off of us and unless we buy Tesla, we can’t do a damn thing about it because POLITICIANS ARE PUSSIES!. No one NEEDS dealers. We need bankers to fund loans, we need mechanics to service our cars, but we don’t need the cast of crooks that work showrooms and finance offices. Real estate agents and brokers are the car dealers of the housing world. We don’t NEED them, but they offer a service that’s supposed to mean the equivalent of easy test drives, easy purchase paperwork, someone else dealing with the DMV to get our car registered, plates ordered, and our trade-in taken out of our name. iBuyers are the third-party rat bastards that hawk aftermarket add-ons to dealers – things like window etching, non-OEM alarms, rust proofing, fabric protection, and nitrogen in your tires; things that drive up the price of your car without increasing its value AT ALL! When you go to sell your car, the dealership who takes it as a trade or the guy you meet off Craigslist isn’t going to give one furry rat’s butt about your window etching! iBuyers add nothing of any value to the transaction. They buy a home, do virtually nothing to it, then flip it back on the market, often within days, at a HUGE markup!
But they plant stories that they don’t…Somehow they always have the ear of a “journalist” willing to print their side of the story anytime anyone accuses them of being window etchers.
For example, in September of 2021, a real estate agent in Nevada went viral on TikTok after making the argument that iBuyers were manipulating the housing market. The media response was swift. Nope, no, no, no… that’s not how any of this works, silly!
In one example5, after a Zillow spokesperson offered this gem, “”Unfortunately, the internet can also sometimes be a source of misinformation and falsehoods – as is this case.””, stooges for the iBuyer industry were given free press to explain the business as follows: “”It’s a very tight margin business – it’s actually hard to make money on this business right now.”” “”If you could rig the residential housing market that easily , the Realtors would have done it long ago.”” (THEY ACTUALLY HAVE!!!, I hear some of you screaming. Or maybe that’s just the voices in my head?) And then the author of the story got down to business schooling us on how the iBuyer business model works. According to the author, iBuyers buy homes at a discount – around 3.5%. Then they sell at a “slight premium” of 1.6%, collecting fees from the seller along the way. “And no,” he tells us, “they’re not aiming to increase prices too much.” Because “”Doing this would be short-sighted. If house prices keep rising like crazy, they will eventually crash.”
A “slight premium”? Let’s head to the data for a reality check. Zillow, outside of its iBuyer business, provides real estate industry reports. One such report from December 7, 2021, titled Zillow Q3 iBuyer Report clearly breaks out the markups iBuyers charged in each listed market for Q2 2021 and Q3 2021. The topline takeaway is this – the median markup went from 6.7% in Q2 to 1.8% in Q3. But it’s even worse than that when you look at specific cities. Tampa, FL had a Q2 markup of 9.3% meaning that iBuyers were buying homes and then marking them up 9.3% when they flipped them a few days, weeks, months later. NINE PERCENT! Not because they added any value to the home by remodeling it, but because they simply inserted themselves into the deal between two parties. If the original seller had listed a home and the iBuyer didn’t exist, no 9.3% markup within a tiny time frame. Tampa wasn’t even the highest markup, that honor goes to Durham, NC with a whopping 11.5% markup in Q2 and an arguably additional, compounded markup of 3.4% in Q3. If a home sells to an iBuyer for $300K, and they get a markup of say 10% when they sell, a new comp is established at $330K. When the iBuyer buys again in Q3, they need to meet or exceed comps or they don’t get the deal, the seller will just list on the MLS, so now the iBuyer buys the same model house down the street at $330K and sells at a 3.4% markup this time – the house is now $341K. We’ve gone from $300K to $341K in less than six months. For those of you who like percentages, that’s a nearly 14% increase in home prices in less than six months because of iBuyers.
In November of 20216, we saw some different data…Zillow was bailing out of their iBuying side-hussle and numbers were coming out of Orlando. First of all, they apparently had an estimated 500 homes in inventory in Orlando they hadn’t listed so as to not, one can assume, compete with the 299 they already had on the market. And this isn’t a new gambit for iBuyers. On February 17th, 2021, Mike DelPrete, a “global real estate tech strategist” (which is to say, not just someone pulling numbers out of his backside for a viral social media moment) posted a story titled Opendoor Withholds Listings From the Market in which he details a month long dearth of new Opendoor homes coming to market even though they “continued to purchase hundreds of homes each week”. He compares the behavior to Zillow who did continue to list homes during that time at a rate similar to those seen in the first quarter of 2020 – AKA Pre-Covid. It’s kind of hard to argue that iBuyers can’t manipulate the market when clearly, they can, by withholding huge swaths of inventory at will. And because federal, state, and county governments think transparency is by and large just a go-to buzz word when they want to blame the other side for malfeasance, it is extremely rare to find a locality with a searchable grantor/grantee index that would allow journalists and regular citizens to glean an understanding of who or what is controlling housing in a particular location. San Diego County is really good about providing that information. I was legitimately astounded back in 2006 to learn that our Recorder’s Office is one of the few to allow anyone to search property transactions by name and date range. Compared to, say, Texas where data is sucked into a blackhole of “non-disclosure” and paid subscription services (except, thankfully, in Bexar County where one can find a searchable/sortable Grantor/Grantee Index and track the turnover of homes perpetrated by Opendoor and Zillow Property Trusts). The ability to understand who is buying up homes in a given area and how long they hold them for is like night and day depending on the state or county in which you live. We’re forced to accept a biased, intermittent stream of data-sparse news stories, blog posts, and water-cooler talk to sketch a rough picture of the housing industry. And I believe that’s intentional. If we understood the depths of the dysfunction of the housing market, if we could plainly see that a lockup of supply is being perpetrated to drive up purchase prices, rents, and by extension property taxes for the benefit of investors and politicians – if we could see that, we might fight back. We might be as disgusted as we were by the people hoarding sanitizer, PPE, and toilet paper to drive up prices in 2020.
Luckily, the Orlando story6 offers an anecdote to illustrate the iBuyer playbook vis a vis the actual flip. It gives us a window into the process that drives up comps, property taxes, and home insurance rates. It allows us to see how they can buy a home at an inflated price to set a new comp so that when they go to sell, their patsybuyer won’t quibble about the price increase and will be able to get the home appraised at the higher value so their loan will fund. According to the article, a home was listed for $285,000 sometime in spring 2021. Zillow paid $445,000 for it. Zillow then flipped it back on the market for $510,000. In this example Zillow paid $160,000 (a 56% markup) over ASKING PRICE! And relisted it onto the market at a $65,000 (14.6%) markup! So much for that whole, ‘We buy at a discount and flip for a “slight premium” of 1.6%’ story line.
As far as I can tell, based on the description from the story, and data from Redfin and Trulia, the home in question is most likely 2006 E. Harding St. – a yellow 5 bedroom as per the description in the story. This home was purchased for $445,200 on June 22, 2021. It was listed on July 9, 2021 (For the aforementioned $510,000? The listing history doesn’t say.). After numerous prices changes, it finally sold on February 10, 2022 for $435,016. If this is in fact the home from the news story, Zillow didn’t make their 14.6% markup, but by buying and listing the home at the prices they did, they did influence the market with all their pricing shenanigans. How many buyers didn’t even see the listing because it was well out of their price range? How many buyers missed out because their mortgage rate locks expired while the seller of this home (Zillow?) refused to lower the price in a timely manner, hoping to eke out as much money as they could get someone to cough up? The sellers of 2006 E. Harding St., quite probably Zillow, lost $10,000 on the price of the house alone, not including agent commissions, the ceiling fans and paint they added on if it’s the same house, and the insurance, utilities, etc. while they held it for eight months waiting for a buyer. It’s conceivable they lost tens of thousands of dollars. All because of greed.
Losing money is kind of a trend with iBuyers in general, and Opendoor and Zillow in particular. In a story titled, Groundhog Day: Opendoor keeps growing and losing money and dated November 10, 2021, we learn that “Opendoor has lost money every quarter since becoming a PUBLICALLY TRADED (emphasis mine) company in late 2020.” Specifically, they lost $421 million between January and September of 2021, in addition to the $199 million they lost in the same nine-month period of 2020. Opendoor bought 15,181 homes in Q3 2021, up 79% from the previous quarter and as of the Q3 report had 17,164 homes in inventory… Over 17,000 homes in some sort of flipping limbo! Sucked out of the normal stream of inventory. But it’s okay, they can’t manipulate the market by controlling that much inventory, right? They can’t control the market by setting a neighborhood comp simply buy paying for the damn house they just bought, right? They can’t manipulate the market by buying multiple homes on the same street, right? Luckily for Opendoor and Offerpad and Redfin, it was all okay because while Zillow, who the week prior had announced they were getting the frell out of iBuying, had “wildly overpaid” for their homes Opendoor, et al. were only paying “market value” – whatever the hell THAT is!
A specific property I’m currently fascinated with is located at 6133 Brookview Ave. in Edina, MN. This appears to be a Redfin flip. I know Redfin is in the iBuyer business, but I don’t stumble across many of their flipping properties, so when I saw this doozy of a flip flop I was aghast. This is a 5 br/5 ba 4003sf BEAST on a tiny lot. Redfinnow Borrower LLC is the owner of record on this property and the mailing address on the property tax invoice matches that of Redfin’s HQ in Seattle, to wit 1099 Stewart St. According to Hennepin County records, Redfin paid $1.255M in February of 2022 (recorded in March 2022) for this property. If Realtor.com is to be believed, they listed it in May of 2022 for $1.3799M. Then they relisted with a different MLS# on 6/9/22 for $1.250M. So, they’re already $5K in the hole on this property just off of their purchase price alone. But wait, there’s more. #1 They are listing a 2.5% buyer’s commission so that’s another $31,250 loss. #2 Property taxes are due. Their first of two installments of $6825.81 was due on 5/16/22 and appears to have not been paid yet and they’ve incurred a penalty of $273.03. Even before calculating other carrying costs like utilities, insurance, staging costs, etc.; they’re going to take a $43,348.84 buzz cut on this house that as of this writing is still an active listing (has not gone contingent or pending due to an accepted offer). But I’m sure there will be a bidding war by this weekend, one million over asking price will be accepted with buyer to pay all closing costs and offering the use of their Swiss chalet to Glenn Kelman for the honor of buying his flip.
Losing money is so normal now that, of course, even after losing $421 MILLION, Opendoor stock shares “surged” and “soared” on the heels of Zillow suddenly bailing after their now infamous “pause”. November of 2021 saw (Opendoor) investors tweeting about how great it was that Zillow was leaving the dance floor to Opendoor whose “advantage is all about “data data data.””7
Can we, for a quick moment, have an honest chat about these internet companies and their frigging DATA? They all love to talk about all the DATA they collect, the DATA upon which they rely to decide how to invest their resources be on the housing market, streaming content, or the color of cars and underwear they roll out of their factories. Everything we do on the line is captured, analyzed, packaged, sold, repackaged, reanalyzed, and resold. Every time someone types in a search for neon anal beads, their profile gets packaged and sold to the anal bead makers to use to determine demand and specific neon color preference. It doesn’t matter if they were searching for neonatal beds and fat fingered the entry or got hijacked by a hinky-kinky autocorrect…they will now and forever be associated with neon anal beads, that search will be part of their file of Facebook photos, Twitter likes, college applications, credit card purchases, medical records, and the names of ex-lovers they’ve searched in google. Housing investors use our internet activity to target areas in which they think they can profit. Every time we search a location within Redfin, Zillow, Trulia, Realtor.com; every time we search for information on housing costs in a particular city, it all goes in the hopper and drives their AI, their algorithms, to buy, buy, buy in those areas. It’s no coincidence that in the immediate aftermath of George Floyd; Zillow and Opendoor targeted the Twin Cities ‘burbs. My point is, I think it’s time to have some fun with these fuckers – start searching for homes in places you’d never live! Let’s get them to buy up all of Flint, Michigan! Start tweeting about how your favorite color is iridescent lime green and baby-crap brown and watch as car color choices expand. Let’s mess up their algorithms so bad they stop scraping our every electronic data point and profiting off what could arguably be considered our unique bodies of work! Let’s mess up their data with gibberish and red herrings so as to render it useless and prevent another Cambridge Analytica. Chat over….
So, let’s take a look at the result of Opendoor’s ‘data advantage’… As I mentioned earlier in this opus, I began noticing lots of empty homes for sale back in 2020, and since I had nothing else to do, I began tracking them. Here is my data… House by house I tracked the sale process then consolidated an estimated profit or loss for each iBuyer into the pivot table below. Review for yourselves and tell me if my numbers are wrong, but it seems to me they’ve simultaneously lost a boat load of money while actively screwing individuals out of the ability to buy a home at a fair price and existing homeowners by way of jacked up property taxes.
(Click on the photos to view)
Zillow lost money, I mean BIG money, they lost $381 M in Q3 2021 on their iBuying business ALONE causing the overall business to suffer a net loss of $169 M that quarter9 but they’re a different animal from Opendoor. They were a consumer data scraping business first, then they went into loans, flipping, and other services. They went public the old school way with an IPO wayyyyy back in 2011. They’re practically dinosaurs in the fintech/housetech world. They decided to raise money to help fund their flipping enterprise in a very early-21stcentury way – they sold bonds. Though of course, they did it in a sketchy way. Borrowing from the car dealership model, they backed their bonds with homes in their flipping inventory in a first-of-its-kind-for-housing-investors move. When you look at the chart images I’ve inserted above you’ll note the list price they assigned to their homes when they put them on the market. Where did they get these numbers? Did they just pull them out of a jar of wishes and use those same numbers to establish a “value” for their flipping inventory upon which they could base their bond collateral valuation? How did no one ask, “Where are you getting the value calculations for your inventory?” Were they able to keep secret the losses they actually generated on the sale of their flipping inventory? However they massaged the numbers and circle jerked the investors, they raised $450 million and in September of 2021 were in the process of selling an additional $700 million more.8 As part of this bond sale, they disclosed that in the future “as much as 20% of the collateral could eventually consist of homes that cost $950,000 or more8”!!! They were going to flip McMansions, fer fak’s sake???!!! And all of that investment-bond selling was on top of $500M in revolving credit lines they had with Credit Suisse, Goldman Sachs, and Citigroup EACH!8
Zillow, in SEPTEMBER of 2021, had a goal to buy 5,000 flipping homes a month by 2024.8 Less than four weeks later they were “pausing” their iBuying program and two weeks after that, it was kaput. At the time they pulled the plug, they had more than 7,000 homes in inventory they needed to sell.10 They laid off a quarter of their 6,400 employees, wrote down $304M worth of real estate that was suddenly worth less than estimates of future sales prices, and penciled in a loss of $240-265M on homes they were obligated to buy. Are you telling me that in SEPTEMBER, they didn’t know their iBuying experiment was a gonner? It’s as if they said, “Hey, make that computer say that a home bought for $100K today is worth $200K tomorrow and let’s use that algorithmic projection to get us some moar moniez!!!” If I rolled up to a bank and said, “You see this picture I just drew with my kid’s crayons? My computer told me it’s gonna be worth a MILLION DOLLARS tomorrow, now give me a loan and I’ll let you have the picture as collateral!” – they’d call for the padded paddie wagon! But that’s the equivalent of all this algorithm bull crap!
Offerpad Solutions, Inc. has its sights set on buying/flipping 70,000 homes a year and Opendoor wants to “capture 4% of all home sales in 100 markets8”! How can anyone say, with a straight face, that these people can’t manipulate the housing market. Not only can they, but they are on the financial hook to do so to pay, at a minimum, the interest on their loans and investor bonds. ‘These three companies could close on $100 billion worth of homes a year, needing more than $20 billion in loans.’8
But revolving business loans and bond sales (which, oh by the way, you cannot get access to as a private buyer who just wants a roof over your head) are not the only way these folks raise funds to go buy that house out from under you only to flip it to you for a markup... Have you ever heard of a SPAC? I hadn’t until I started down this path of housing discovery. It stands for Special Purpose Acquisition Company. Basically, nearest I can tell, it’s a shell company that does nothing; it’s just a business on paper that is already allowed to publicly trade stocks and has a fat checkbook stuffed with investor contributions. It’s a vehicle that picks up another corporation, allowing them to go public through the SPAC’s credentials, trading shares on the stock market, without all the, you know, registration paperwork, oversight, etc. involved in a legit IPO. If I understand correctly, it goes like this. You and a million of your friends give SPAC XYZ $100. SPAC XYZ’s board now has $100M and they go shopping for a company. They buy Private Company 555 and take it public. When they bought Private Company 555, the OG investors in PC555 got paid, their shares were bought out with your and your friends’ money and now you own a percentage of Private Company 555 which is GOING TO THE MOON! Hold tight, Diamond Hands! Only it doesn’t. It poops its pants and you’re left holding the mess. But because you’re an “investor” in an over-hyped industry “disrupter” that’s going to, according to the media, revolutionize home sales for the tech-addicted Millennials who all have tons of cash lying around, again, according to the media…you don’t care that the pants are a little puddin’ streaked. For, with a few well-placed stories in CNBC, the Wall Street Journal, etc., with a little quarterly spin about “headwinds” and “uncertainty due to __________ (fill in the blank with “unrest”, “election”, or any damn noun you fancy (these quarterly reports are basically Mad Libs anyway for all their transparency and clarity)); there’s a “surge” in your SPAC’s share prices. It’s all going to be fine, right? Only, go look at Opendoor’s stock graph. It’s not going to be fine, is it? Not for you anyway. And not for the people who were given shares as part of their pay packages at the company. The original investors – they got out and bought a yacht and a private island…laughing at you the whole time. The schlubs still working at SPAC XYZ call up their frat buddies who write spec pieces for the financial rags and beg them to hype their SPAC to create a little bump just as their RSU grants vest so they can make their property tax payments. People were conned. It’s like these companies just need revenue but no profits and people are fine buying into the con. People bought into the hype of a service or product no one needed. They bought into the notion that a company can be valuable even if it loses money every single year. People basically bought shares in a company that does window etching at car dealerships because they assured investors that everyone is going to want it, ‘Imagine if we do this to every car in America, in North America, in Europe, IN THE WORLD!’
And to add insult to injury, the company to which you gave all that new juicy investment money; they went out and ran up the price of homes so much that they set new property values that will be used by County Assessors to ream you on property taxes this year or will prevent you from buying a home any time soon because everyone in your town now thinks their homes are worth 100% more than they were in January 2020.
As if they were reading the nearly extinct tea leaves of logic, the authors of the story on Zillow’s flipping bonds8wrote, “The main risk for Zillow [and, let’s face it, other iBuyers] is that it overpays for houses. If the market slows, the company could take a loss on the homes, or struggle to sell them as quickly as anticipated.”
Gee, ya think?????
But how dare they write such a thing? They could panic the market, think of the investors! Oh the humanity. Don’t they know, Housing Never Goes Down! The “expert” economists and industry professionals the media trots out to fill time on CNN, Fox, MSNBC, CNBC, and the rest of the talking head alphabet soup stations told us so! Housing may “plateau”, but demand is so high and supply so low! Plus, we have algorithms to predict the future! It doesn’t matter that the algorithms that are fed data created by working-class renters who dream of owning a home and click on home listings while dreaming of getting out of their apartment even though they have no money to do so, data created by journalists and other researchers tracking the market, data created by people who just like to screw with data and click random listings! It’s like the “experts” don’t even know how algorithms work, they just like talking about tech they have no grasp of because idiots are so willing to throw money at them for speaking in tech tongues.
It’s absurd to me that anyone would rely on data scraped from the internet to predict anything about humanity, much less their housing market inclinations. To quote a Zillow spokesperson, again, “Unfortunately, the internet can also sometimes be a source of misinformation and falsehoods…”5
So, iBuyers in a nutshell. Industrial scale flippers who cumulatively bought up tens of thousands of homes in the last two years alone, removing them from the normal system just to tack on a premium the next buyer would have to pay. They drove up property values by setting and competing against their own comps as they targeted very specific neighborhoods which drove up property taxes for existing residents and priced out many individual buyers, depriving them of the ability to get off the rent train and have stability in their lives. In Zillow’s case, they did all this while losing money, trying to prop up their stock prices with bond sales and talk about “pausing” before finally pulling the plug and tanking their stock prices, leaving shareholders to pick up their post-pump dump. In Opendoor’s case, they seem to lose money on their core reason for being – flipping homes, while their stock price has fallen from an all-time high of $35.88 in February of 2021 to 8 bucks today. The Dotcom bust 2.0 is well underway. What’s so insidious is that it feels like it was intentional. It feels like they took a new generation of investors for a ride, using Dotcom 1.0 as a blueprint to cash in on investor ignorance and quest for return on investment (ROI). Some will argue, ‘But look at Amazon! They lost money for years and look at them now! You just need to give iBuyers a chance to succeed!’ No, no I really don’t. First of all, they’re financially hurting people; and secondly, AMAZON ACTUALLY SELLS CRAP, iBuyers don’t provide anything of benefit!
And of course, there’s a rotten cherry on top of this shit sundae. iBuyers are in cahoots with the REO-to-rent crew. As news of Zillow’s iBuyer business going Tango Uniform hit the media, some reporters started caring about digging into details (wish they’d done that years earlier!). As of November 10, 2021, Zillow owned 9,800 homes and was obligated to by another 8,200.11 Way off from the 7,000 we’d been told about earlier, but it’s just business accounting, no need to be accurate or anything. So that’s ~18,000 homes Zillow had on its iBuyer books. They sold 2,000 of them straight to Pretium Partners, AKA Progress Residential to become REO-to-rent investment homes!!! And apparently Invitation Homes and American Homes 4 Rent were in discussions to also buy some. When you look at the investor presentations provided by these REO-to-rent companies, they list iBuyers as acquisition partners! REO-to-rent investors and iBuyers are colluding to bypass the Multiple Listing Service (MLS) so that buyers have no opportunity to buy these homes! You will be a renter and you will like it because you can’t afford to compete with bank, and investor-funded courtesy of the Federal Reserve and Congress, cash offers to sellers and once they own the homes, they flip them straight to institutional rental investors! “A Bloomberg News analysis of more than 100,000 property records shows that Zillow and the two other biggest iBuyers, Opendoor Technologies and Offerpad Solutions, are selling thousands of homes to landlords backed by KKR & Co., Cerberus Capital, Blackstone, and other large institutions. In many cases, those properties are never even listed, further squeezing average buyers out of competitive housing markets.”12
2 NewsObserver.com. Five key takeaways from our analysis of Opendoor’s Wake County home buying spree. Sessoms, Ben. 24 Jul 2021. Online.
3 WSOCTV.Com Opendoor faces disciplinary action after complaints. Counts, Glenn. 5 Apr 2022. Online.
4 FTC.GOV. FOIA Requests Closed between 11/01/2021 and 03/15/2022. 15 Mar 2022. Online Report.
5 Marketwatch.com. Viral TikTok video accuses Zillow and others of manipulating the housing market. Here’s what’s really going on. Passy, Jacob. 27 Sep 2021. Online.
6 WFTV.com. Inside the collapse of Zillow: hundreds of homes to hit Orlando market. Papantonis, Nick. 6 Nov 2021. Online
7 CNBC.com. Opendoor shares soar as investors predict gains in home buying market after Zillow’s exit. Levy, Ari. 4 Nov 2021.
8 Bloomberg. Zillow’s home-flipping bonds draw Wall Street deeper into housing. 27 Sep 2021. Clark, Patrick. Online.
9 Startribune. Zillow exits home deals; it had a small presence in Twin Cities real estate. Buchta, Jim. 3 Nov 2021. Online.
10 CBSNews.com. Zillow layoffs closing Zillow offers. 2 Nov 2021. Picchi, Aimee. Online.
11 Wall Street Journal. Zillow Sells 11% of Its iBuyer Inventory to an Investor. 10 Nov 2021. Parker, Will. Online.
12 The Orange County Register. How Wall Street is using iBuyers like Zillow to eat up starter homes. 12 Jan 2022. Buhayar, Noah., et al. Online.
Universities: Students need housing. Fact. Universities, especially PUBLIC ones here in California are in trouble because they’ve prioritized foreign students for way too long and now people are getting rather pissy about it. Rather than reprioritize their admissions protocols to focus on CALIFORNIANS first, Americans second, and foreigners last; they’ve decided to have their cake and eat it too…and our idiot legislature does nothing. The universities’ answer is to expand enrollment to include more Californians while not having to give up any of that sweet nonresident tuition. We can debate the bogosity of that plan in other posts, for now I just want to focus on what that plan does to the local housing markets. Especially during the COVID Pandemic. Universities build housing because they like excessively charging people to live in the equivalent of third-world country hostels. I’m barely exaggerating. Room and board can tack on more than $10,000 to an annual tuition bill every year, and every year tens of thousands of college students sign up to live with 1, 2, 3 or more strangers, packed into bunkbeds; navigating the sex lives, hygiene practices, and study habits of their roommates. But for those students not lucky enough to get “campus housing”, they’re forced to find shelter out here in the gen. pop. world of RENTERS. When students overflow into tight rental markets (made so by Airbnb investors and other property lockups), it drives up prices and frustration for those who are just trying to save enough to buy a place. Toss in a pandemic where the universities put on their ‘We Care’ stage production and cut down on the number of students allowed per housing unit, and the rental market breaks. Rents in San Diego alone went up 29.3% in 20211 and nationwide 10.1%1 on average. When your $2,000 rent now costs $2,200 a month because you have nowhere else to go because all the local housing is supposedly occupied, you’ve really got to ask, WTF? In 2019 the rental market was softening, but throw in a pandemic that killed a million more people than were supposed to die and caused people to leave cities like San Diego, San Francisco, New York, etc. for more rural, remote, less congested areas, and somehow the rental market is red hot in those same cities? The math doesn’t add up. One variable in the calculus, in my opinion, is college housing.
Everyone wanted to get back to school for the Fall of 2021. Universities wanted kids on campus because, money. Students wanted out of Ma and Pa’s house. Colleges said, ‘Get back here! No more online classes!’ Then Delta and Omicron popped in to ruin the house party. Universities didn’t want bad publicity when kids got The COVID. The answer? Delay the start of in-person classes; demand mandatory vaccines, mandatory testing, mandatory masks; and limit students per housing unit. UC San Diego grew enrollment AND limited dorm room occupancy to two students vs. the usual three eliminating 2,074 beds2 and causing thousands of students to struggle to find housing at the start of the 2021/22 school year3. They forced students out into the regular rental market to compete with year-round residents who were already struggling with hodge-podge lockdown rules that constantly impacted employment and the ability to find housing as everyone sheltered in place from the constant stream of government incompetence – and of course, COVID.
But it’s not just the COVID Pandemic. It’s the University of California’s enrollment policies that are the worst of the problem. The issue spans the entire UC system. Thousands of students were left to live in cars, commute long distances from their family homes, or cough up horrendous rents to attend college in 20213.
Consider:
UC Historical Fall Enrollment4:
1990: 161,997
2000: 178,723
16,726 ten-year increase
2010: 229,108
2020: 285,862
57,754 ten-year increase
2020: 285,862
2021: 294,662
8,800 one-year increase
To break that down somewhat:
San Diego:
1990: 17,339 to 2000: 19,629 ten-year increase: 2,290 students
2010: 29,176 to 2020: 39,576 ten-year increase: 10,400 students
2020: 39,576 to 2021: 41,885 one-year increase: 2,309 students
Los Angeles:
1990: 34,851 to 2000: 35,210 ten-year increase: 359 students
2010: 38,157 to 2020: 44,589 ten-year increase: 6,432 students
2020: 44,589 to 2021: 38,157 one-year increase: 1,527 students
Berkeley:
1990: 30,632 to 2000: 31,267 ten-year increase: 635 students
2010: 35,833 to 2020: 42,327 ten-year increase: 6,494 students
2020: 42,327 to 2021: 45,036 one-year increase: 2,709 students
And that’s just the University of California system. It doesn’t account for the CalState5 system that enrolls over 481,000 students on average every year and which has schools in San Diego (2021 enrollment: 35,732), Los Angeles (2021 enrollment: 27,029), San Francisco (2021 enrollment: 26,620), private universities like University of San Diego, University Southern California, etc., or community colleges in these communities.
And it’s not just California. It’s the University of Georgia who “saw its largest-ever enrollment, with 40,118 students in fall 2021.”6 and is paying returning students to give up their own university housing and fend for themselves in the open rental market, infested with Airbnb rentals8,9, so that freshmen can have space to live on campus.7 Student housing is a problem in North Carolina10,11 too.
I have to ask – are students getting a raw deal when they take on tens of thousands of extra student loans to go to these schools in areas impacted by housing-industry investors, tourists, and exceptional greed? Where are all the hotel owners? Are they making huge profits and turning away guests? Are STR owners providing some service that hotels can’t because they are overbooked, or are STR owners driving up the cost of housing so they can gouge tourists as a “side gig12”? Are STR owners (and the rest of the housing investors) any different from the guy who bought up all the hand sanitizer in March of 2020? Are we supposed to just pay more so these people can make a profit? Are we supposed to blindly follow orders and just build moar homz to feed the Zompire? Are we really supposed to accept that we just need to endlessly destroy resources and habitat so that we can finally have enough homes to satisfy short-term and long-term rental investors, flippers, vacation-home owners, AND folks who just want to own one damn house to live in? How many excess homes do we need to build so that we can satisfy investor and home-owner demand and still drive down price? Do we need 10 million empty homes so that everyone can finally have ONE affordable one? And how do investors come out of that? Seems to me, if everyone has at least one home and we have millions sitting empty, who’s going to make money at that point? Will homeowners lose all that equity cushion Diana Olick told us would protect us from a crash? Will investors let it happen? Or will they send their lobby groups13 to the media, to the politicians in their back pocket to whine about a glut of homes affecting their precious investment portfolio? SHOULD WE ALLOW HOUSING TO BE A COMMODITY?
Universities wanting to cash in on as much student tuition, room, and board as they can is colliding with local mayors wanting to bring in tourists who will pay occupancy and other taxes (assuming the local government has gotten around to regulating STRs). Add to that the lock up happening in the rental market and the flipping iBuyers who drive up prices, literally overnight…I’m just saying, there’s a herd of elephants in the room that wasn’t here ten years ago, and no one is talking about any of them and the damage they are inflicting on the housing market and personal financial situations of hundreds of millions of Americans.
2 San Diego Union Tribune. Got a spare apartment? Thousands of UC San Diego students need a place to live. Robbins, Gary. 18 Jul 2021. Online.
3 edsource.org. Thousands of UC students struggle to find housing. Burke, Michael. 13 Sep 2021. Online.
4 UniversityOfCalifornia.edu. UC Historical fall enrollment, 1869-present. University publication. Accessed: 10 Jun 2022. Online.
5 CalState.edu. University-wide enrollment – Fall 2016-21. University publication. Accessed: 10 June 22. Online.
6 news.uga.edu. UGA continues to break records for enrollment, completion rates. Freeland, Sara. 2 Dec 2021. Online.
7 The Atlanta Journal-Constitution. UGA’s answer to dorm overcrowding? Cash to students who forgo rooms. Downey, Maureen. 19 May 2022. Online.
8 GradyNewsource.uga.edu. Athens Accommodation: How Airbnb Could Be Affecting The Classic City. Grady Capstone Journalist. 20 Oct 2018.
9 Airbnb.com search performed 5 Jun 2022 resulted in 366 whole-home (Entire place. A place all to yourself) stays available for a four-day (M-Th) stay in mid-September 2022.
10 WLOS.com. ‘Incredibly concerning’: trickle-down effect dries up housing options outside of Buncombe. Emert, Jennifer. 25 May 2022. Online.
11 MyFox8.com. NC AT&T State University student scramble for student housing. Hardin, Tyler. 17 May 2022. Online.
12 CNBC.com. How this 37-year-old makes $34,000 per year in extra income – as an Airbnb host. Becker, Sam. 22 Jan 2020. Online.
13 The Hill. Providers of single-family rental homes are an important part of America’s housing ecosystem. Howard, David. 20 May 2022. Online.
The Sugar-Daddy Triad: This is the cabal that funds and clears the way for the Zompire creature they created to devour everything. Well, everything but the Triad’s possessions anyway.
They each sit along one side of their triangular mahogany table in a candle-lit cellar carved into the ancient stone under some castle in a European forest, away from the prying eyes of the world. The table gleams, firelight dancing off its varnished surface polished to glassy perfection with lambskin soaked in the lamentations of the working class. Amber mosaics set into large jewelers’ mounts hammered into the stone fortification absorb and reflect the candle light, casting a warm glow onto missing masterpieces – portraits of centuries-old models painted with crushed gems and ancient oils, bearing silent witnesses to the proceedings.
The Federal Reserve, The Banks, and The Politicians. They go by many names: The trifecta of intentional dysfunction, The trio of calculated antimony, The triumvirate of temerity, The troika of deliberate perplexity…but their goals are always the same – sow confusion, create chaos, and orchestrate windfall profits for themselves and their benefactors from their perch in the eye of the storm.
The same people who created the monster that built up and destroyed the OG Dotcom bubble, the same people who summoned it again and imbued it with new powers to create Housing Bubble 1.0 (HB 1.0) and then destroy it, the same people who swore they’d learned their lesson and would henceforth move the economy forward responsibly and conservatively – they laughed in our faces and summoned their beast again. Only this time it’s stronger than ever and refuses to listen to its makers – preferring instead to listen to Miley Cyrus sing, Can’t Be Tamed over and over on the boom box it pulls behind it in a little red wagon.
The Federal Reserve’s Federal Open Market Committee (FOMC), an “independent” body of economists with a Mengele-like perversion for experimentation on the fiscal health of working-class Americans, pulled out their 2008 playbook and thought, ‘Gee, I wonder what happens if we double down on what we did here. Let’s try this, let’s crash benchmark interest rates for 18 months and print enough money to buy up trillions in Treasury Bills and Mortgages. Every time a bank loans money for any home purchase, let’s buy it so they have that money to re-lend again and again and again. Simultaneously, let us lower mortgage rates so idiot Americans will take on trillions in debt to go buy stuff! Let’s explode home values to create tappable equity people will use to BUY EVERYTHING! We’ll create money by manipulating the housing market where there is no real connection between value and cost other than people’s emotions. Housing prices are whatever we can convince people to spend on it. We’re gonna be heroes! Economic stimulation on steroids! Hey guys, don’t forget to go invest in some stocks yourself, we’re gonna boost the economy so HARD!’ They unleased a BIBLICAL flood of money and had the chutzpah to act surprised when it completely FUBARed the economy. These are ECONOMISTS! It’s literally in their job title to understand how the ECONOMY works, the financial science of string pushing and waterflow if you will, but they claim they were taken aback by the fact Americans spent like the credit junkies they’ve been trained to be.
The banks were only too happy to bring on thousands of loan officers and support staff to process all the refis and purchases, I mean, what better way to get people to stop talking about their fraud, sexual abuses, and general bigotry than to give people jobs where they can make money hand over fist! If the media is covering the blazing hot mortgage industry fueled by a pandemic-driven panicked demand for housing, no one will even notice that we’re not paying ANY interest on the accounts of people trying to save money. The Federal Reserve gave banks a blank checkbook to lend out money to people willing to go neck deep into debt AND permission to screw people who didn’t want to get into risky yield-chasing investments. Savings accounts, CDs, anything considered “safe” or “conservative” where one might want to hide during, oh I don’t know, a WORLDWIDE PANDEMIC, earned, I kid you not, .01 to 0.3% interest while inflation did this:
The Fed and the banks worked hand-in-glove to bend everyone over the exam table. They set up a system where they personally made buckets of money while creating a system where the only way for a working class American to give their nest egg a shot at earning any money was to take out a loan from the casino and pour it into a slot machine.
That’s what banks did with the free money the Fed printed for them, but with the easy money provided by low interest rates? The banks also capitalized on their ability to offer credit vehicles to, and act as IPO/SPAC Sherpas for, the Nouveau DotCommers – the aforementioned iBuyers, REO-Rental companies, plus the other “PropTech”, “FinTech” and other “disruptors” who all got themselves shiny new .com address and began hawking their wares. The number of companies that went public via a SPAC during the pandemic is staggering1. Looking at the current share prices of these SPCAs makes my blood run ice cold. Like the Gold Rush of ’49, the game was won by the early birds and the people providing the services and supplies. The folks selling pick axes and dungarees, the ones providing cash for gold dust, the venture capitalists who bought up all the land then sold it off in tiny parcels to desperate souls – they made bags of cash2 – the investors who bought the public offerings? Not so much. Take a look for yourself at the list provided by Crunchbase, type their names into a stock app. Anyone who bought those SPACs, who bought into the hype in the months after they went public, and is still holding on waiting for a miracle may be waiting for a long time…
And then there’s the politicians, the Grand Enablers. They don’t have to have a plan, they don’t have to be proactive or organized during a crisis. They have perfected the art of deflection and doing nothing to the point they go on vacation, disappear for weeks at a time, break their own rules during a pandemic and no one even raises an eyebrow. The politicians broke their own fiscal dam and sent their own torrent of free money into the FOMC-flooded economy by auto-depositing numerous stimulus checks, expanded unemployment, and payroll protection grants; by doling out huge checks for personal protective equipment purchases, production expansion contracts (think testing, testing supplies, testing machines, vaccines, etc.), and unprecedented, budget-busting allocations directly to state coffers. Corporations and their executives made absurd profits courtesy of the US Congress.
Someone like Jerome Powell utterly fails at his one job and he gets re-nominated for another term. Someone like Janet Yellen who took over from Bernanke and has been in this racket long enough to know better, touted the party line – ‘It’s transitory, you stupid peons!’
Trump, Biden – they’re cut from the same cloth as Dubya, Clinton, and Obama. Talk a good game and then claim the other side is tying your hands so you can’t do anything. They can tell us, with a straight face, ‘Inflation will be painful, just get over it. We’re working on it.’ and we accept it like a toddler who drinks whatever his parents put in his sippy cup. They can tell us they’re working on health insurance, prescription costs, student loans – and we just let it drag on as costs cripple us. They tell us they’re ‘calling for investigations’ into oil prices, price gouging, bank fraud, etc. and we accept that as “doing something”. We don’t even question their complete failure to deliver on anything, ever. We just get distracted by some idiotic show on PrimeFlix or some pronoun war on Twitter and forget that we’re paying a group of politicians to intentionally do nothing.
Congress? I could go on all day about this lot, but suffice it to say, these skidmarks have become sommeliers of whine, doctors of hypocrisy, and gurus of greed… They can never seem to do anything of value for We the People in the trenches actually doing the work. They never seem to have time or room in their schedule to pass laws that would help Americans. Fix healthcare? Nope. Fix education? Nope. Fix the tax code? Nope. Fix anything that would mean better lives for Americans, give them hope, prevent violent tragedies and crime? Nope. Poor them, they work so hard but everyone is so mean to them and they can’t engage with the public or write a meaningful bill because it won’t go to a vote. Their lives are so hawwwwd. But if it means diddling their phone’s social media apps, protecting SCOTUS, going on vacation, buying votes close to an election, obliterating oversight and ethics committees, enshrining payola programs and stock trading opportunities, getting on television, or rubbing elbows with celebrities at circle-jerk galas – they suddenly have a sense of urgency to get things done, they suddenly have all the time in the world to write letters, fly around the country, or hold meetings and votes. These parasites, these greedy tapeworms, latch onto our system and suck it dry of all resources, then have the audacity to declare they must be reelected decade after decade to continue their ‘good work’. No one questions the fact that THEY NEVER ACOMPLISH A DAMN THING OF VALUE! We just keep reelecting the same wanklords hoping for a different outcome. We are truly insane.
2 MarketWatch. Chamath Palihapitiya files for four new SPACs, with a new focus. Owens, Jeremy C. 2 Jun 2021. Online.
Renters Who Want to Buy: There is an argument to be made regarding the Millennial cohort wanting to get out of apartments and have some freedom to play Rock Band (or whatever the kids play these days) without getting a nasty letter from their landlord because a wall-sharing neighbor complained. I get it. I’m just not sure the numbers add up the way “journalists” and “experts” keep telling us they do.
I know it’s all the rage to be a millennial “journalist” schooling your peers about the “housing crisis”. “Journalists” these days think themselves so clever and immune from ire of their own generation (after all, there’s a war between the generations, not amongst them – it’s Millennials vs Boomers with side skirmishes against Gen Xers who dare to step out of their lane or on their dicks by accident). They write stories with headlines like, Housing Crisis Means Home Prices Won’t Come Down. Sorry, Millennials. If a Gen Xer or Boomer had written that title, there would be heads rolling at Business Insider, but since it was a Millennial who wrote it and quoted luminaries from Axios and NerdWallet, it is both truth and sanctioned.
But what if it’s not truth? What if “[t]he housing shortage continues to drive home prices”11 narrative is a game of telephone that was intended to brainwash a whole generation into believing housing never goes down? It’s like a broken record with some of these “journalists” and “experts” – “Demand still exceeds the supply of available homes for sale, the economy is creating jobs, and lending standards are strict. Those factors work to keep home prices from declining.” Are these “influencers” all reading from the same car warranty telemarketer sales script? Of course, a shill puff piece wouldn’t be complete without a gem from the NAR (National Association of Realtors) – “Normally, higher mortgage rates cause home prices to cool,” says the senior economist and director of forecasting at the NAR, “but I don’t expect home prices to drop in 2022. We will see slower home-price appreciation, but not a price drop.11” And this was on JUNE 10th of 2022! This wasn’t a quote from the heady days of sub-3% mortgage rates. This is NOW, in the face of 6% mortgage rates and a serious-ish about inflation Fed.
It’s like a dream where I’m screaming, Don’t believe the hype!, but no sound comes out. Housing DOES go down. We proved it in 2009. But even if That Was Different and prices can’t come down this time for reasons,let’s talk about the natural course of events that has to happen in order for housing to NOT go down. Wages will have to go up. A lot! If housing is supposed to double in Raleigh-Durham to a median price of $900K, then Meta better cough up some big-time wages to all the employees that are heading there to continue the demand for moar homz. If wages have to keep going up to be able to qualify for and afford doubled mortgages, then prices are going to have to keep going up, because Meta isn’t going to take a hit on revenues and profits when they have a Zuckerberg and shareholders to please. If prices for everything have to keep going up to accommodate the ever-rising home prices, then I’m gonna need a raise too or I won’t be able to afford to buy food, gas, or health insurance. And if I need a raise, my employer is going to have to increase the prices of his widgets so he can pay me my raise cuz he ain’t gonna do it out of his pocket or piss off his investors. And you see where this is going. The Federal Reserve will of course have to step in and gin up the money printer again to drive down mortgage rates and speed free money into the system. Soon the dollar will be worth less than a peso and bread will cost $50. But, it’ll all be fine because housing will never go down! The Fed will save us! We just need to build moar homz!
But who will buy all these homes? I mean, if we’re going to build millions more homes - single-family homes, condos, townhomes, apartments, tenement buildings, project towers, ADUs. If we’re going to build enough homes so that there is a glut of empty homes and supply will finally exceed demand and prices will come down. Who’s going to buy them all? REO-rental and iBuyer Investors won’t want an asset they can’t make profit off of so they’ll stop buying flips and try to sell before the glut arrives to cash out – flooding the market with homes and crashing prices. If everyone now has a primary residence and a couple of Airbnbs because we have millions more homes, tourists will have so much choice that occupancy rates will crash and more homes will hit the market as STR investors sell because they can’t cover their nuts anymore. All of this just in time for the Boomers to die off or head off to their nursing home to be warehoused as Medicare cows. Seems to me that building moar homz will actually bring about a massive housing crash BECAUSE WE CURRENTLY HAVE PLENTY OF HOMES when outside forces aren’t dicking with the delicate balance between supply and demand of a scarce resource.
In general, Boomers make up 29.4% of the population, Gen X is 19.9%, Millennials are 22%. That’s 71.3% of the country competing for homes, jobs, and space on the freeway. At 20.3% of the population, Gen Z will be graduating college and trickling into adulthood followed by the 8.4% still in grade school1.
According to Pew Research Center, in 2020, Millennials overtook Baby Boomers as America’s largest generation2, but according to them, it’s going to take years for Boomers to die off in any significant way. Part of Pew’s data reflects the idea that immigrants are adding to the Millennial demographic. I’m curious how the pandemic affected these numbers. Pew’s report was written before COVID deaths, deaths caused by pandemic shutdowns, and before we shut the doors to immigrants due to COVID concerns. In 2019, Pew said there were 72.1 million Millennials (those aged 23-38), 71.6 million Boomers (those aged 55-73), and 65.2 million Gen X (those aged 39-54).
Today, in 2022, the general consensus is we lost a million more Americans than we would have without the pandemic, and arguably, the majority of those deaths came from the Boomer generation.
What happens to the housing supply when Boomers start picking up the pace of leaving their homes for nursing homes or urns on mantels? They represent 30% of the population and over the next ten to fifteen years they are going bye-bye in large swaths every year – it’s supposedly just a fact of life (and death).
I’ve found it frustrating to try to understand the generational flux and how it impacts housing demand. Every day, people die, elderly move into nursing homes which to my understanding is not included in the housing market calculations, and individuals decide to create or break up households. This system has been going on forever and until around 2015 didn’t seem to be as broken as it is today. Did so many Millennials move out of their parents’ homes in the last 2 years that we now have millions of them competing for the same homes? Did they not get married and create at least 2-person households? Are they all living on their own, demanding entire apartments, townhomes, and single-family homes to themselves? Is there something inherently different about the Millennial generation that I do not comprehend that has led to this “housing supply crisis”?
115,033,000 were occupied.
17,928,000 were vacant.
Of the 115,033,000 occupied homes, 75,209,000 million were owner occupied and 39,825,000 were renter occupied3. (Their math has a disclosed rounding issue that leads me to believe there may be nearly an additional 1,000 occupied homes.) Owner occupation was at 65.38%
127,574,000 were occupied.
15,137,000 were vacant.
Housing increased by 9,750,000 units in roughly ten years, approximately 975,000 units a year and there are approximately 2,791,000 fewer vacant homes.
Did so many Millennials move out of their parents’ homes, out of college dorms, in the last ten years as to eat up 975,000 homes a year AND 2.791M vacant homes?
Or is there some other mischief going on?
There is a distinct lack of transparency, in my opinion, with regards to where all the housing is being held. Does a reduction of 2.791M vacant homes really equal a Housing Shortage?
I don’t have access to the numbers from 2012, but the 2022 data gives some insight into how the vacant homes are classified:
These “year-round” vacancies consist of: 2.730M For Rent
667K For Sale
928K Rented or Sold
use, and “other” (a hodge-podge of bullshit
reasons including “personal reasons”)
And then there’s an additional 3.385M off market and marked “Seasonal”.
I have no idea if the 17.928M vacant homes of 2012 were similarly broken out, but either way, it begs the question – are there, right now, 2.730M homes For Rent being held off the market both to renters and buyers? Are we okay with 10.362M homes being held off market for occasional use and personal reasons to the point we are ready to revisit housing projects and create high-density housing blocks so that investors can gobble up all the single-family homes? Do we have an ocean of financially solvent homeless families facing a manufactured dearth of homes or do we have a sufficient number of dwellings that are just being used as investment vehicles for yield chasers?
For leadership, from the Federal to State and Local levels, the answer to this alleged “Housing Shortage” is build the modern version of 19th Century Tenements and 20th Century Projects. They want 300-unit apartment buildings, they want to cram 4-10 housing units onto a lot where one single-family home once stood12. And ADUs. Lawd, don’t get me started on ADUs. Accessory Dwelling Units – as if your house needs an accessory – a belt or a scarf or a pearl necklace! That name alone makes me want to spit nails, but when I think about the fact it’s just a shack in the back of someone else’s home, a shack they rent out to someone because that someone can’t afford to own their own private space because Ma and Pa need to possess three homes – their primary residence, a rental unit, and their lake house! Why is it that only a small percentage of Americans should control the vast majority of homes, depriving so many of the same dignities, securities, and financial benefits they themselves demand? Oh that’s right, millennials prefer to be renters – or so the internet “experts” tell me.
Moody’s Mark Zandi continuously pops up in stories about housing. He seems to be the go-to guy for the Democrats who want to push the whole American Housing and Economic Mobility Act of 2021. He argues that we are short 1.8M affordable homes – homes at the lower end of the price range, starter homes if you will5. I don’t know how this jives with other “experts” who claim we’re short millions more homes, because as I’ve said before, there is no real data, no transparent study that explains where all the housing really is and who owns/controls it. At no point does Zandi even acknowledge that REO-Rent investors have intentionally vacuumed up huge swaths of starter homes, much less the total opacity of the homes-as-investment industry. Do we need Liz Warren’s plan to produce 3.5 million new homes6? Did we need the BIBLICAL flood of money provided by the Federal Reserve and politicians during the pandemic? It seems like these people never really have a firm grasp of facts or how things work, they just like headlines about giving away money, and ‘creating jobs and equity and equal opportunity’ without having to actually DO anything.
And I get it. We need lots of good-paying, benefit-providing jobs so that everyone has the same opportunity to have nice things, but when it comes to housing I have to ask is Liz on the right track when her bill calls for incentivizing local governments to eliminate unnecessary (in her opinion I assume because she offers no facts to support their lack of necessity) land use restrictions that drive up costs6? Do we need to blow up CEQA, the California Environmental Quality Act7, so that we can build Newsom’s 3.5 million moar homz8 by 2025 in this state alone? Should Newsom be taken to task for his bogus 3.5 million house shortage rhetoric9? When do we demand truth over consultants’ opinions9? Is there a reason no one is talking about STR owners bogarting housing supply, flipping iBuyers disrupting the normal flow of home sales, or REO-Rent investors locking up inventory to control prices/rents? Is there a reason we aren’t discussing the fact California is losing residents every year and growth projections are being revised down10 yet we’re still banging the drum about a “housing shortage”? Is there a reason we just accept the opinions of “experts” who tell us explosive growth in North Carolina is a given and we should all just accept it and bend over? Ditto for Texas, Nashville, Atlanta, Denver, and all the other cities targeted by the investors who didn’t exist during the last bubble?
We don’t question anything, we just get an idea in our heads, put the bit between our teeth, and run until we fall down exhausted and die.
2 Pew Research Center. Millennials overtake Baby Boomers as America’s largest generation. Fry, Richard. 28 Apr 2020. Online.
3 HUDUser.gov. US Housing Market Conditions 4th Quarter 2012. Online.
4 US Census Bureau. Quarterly Residential Vacancies and Homeownership, First Quarter 2022. Online.
5 Moody’s Analytics. An Assessment of the American Housing and Economic Mobility Act of 2021. Zandi, Mark. April 2021. Online.
6 Warren.Senate.Gov. Warren and Colleagues Reintroduce Historic Legislation to Confront America’s Housing Crisis. 13 Mar 2019. Online.
7 The Atlantic. How Californians Are Weaponizing Environmental Law. Gray, M. Nolan.
12 Mar 2021. Online.
8 Medium.Com. The California Dream Starts at Home. Newsom, Gavin. 21 Oct 2012. Online.
9 San Diego Union Tribune. Column: Housing debate needs to get facts straight. Smolens, Michael. 11 Mar 2020. Online.
10 CalMatters.org. California’s shrinking population has big impacts. Walters, Dan. 10 Apr 2022. Online.
11 BusinessInsider.com. The Great Recession misled millennials: It made them think home prices will eventually come down. Lloyd, Alcynna. 10 Jun 2022. Online.
12 CBS8.com. Governor Newsom signs new legislation to increase housing density in California communities. Allyn, Richard. 16 Sep 2021. Online.
In Conclusion:
We Americans talk a good game about equality, opportunity, and The American Dream – but when it comes to walking the walk, we feign an injury and sit out the work. We want safe neighborhoods, safe schools, and affordable necessities and amenities. We want smooth roads, open spaces, and clean water. But we don’t want to make any personal sacrifices to achieve those goals.
In 1961, Jane Jacobs wrote a book titled: The Death and Life of Great American Cities. It is a seminal dissertation on healthy communities. She proves that healthy neighborhoods hinge on diversity – residents of all ages, cultures, and occupations who walk and watch the streets and know their community. She demonstrated that when residents have skin in the game, when they are emotionally invested in the success, safety, and future of their environs, their communities thrive. She argued that cities are organisms and when you begin to chip away at a healthy organism, taking its eyes, its ears, its heart, its soul, its character and lock it all miles away in a tree-less field of 30-story apartment buildings, it ceases to function properly. She wrote, “It may be that we have become so feckless as a people that we no longer care how things work, but only what kind of quick, easy outer impression they give. If so, there is little hope for our cities or probably for much else in our society.” She didn’t think it was so, she felt there was still hope. I’m not so sure.
We’ve turned homes – our shelter – a vital component to our very survival as human beings as well as societies, into something as trite as lipstick or fluffy socks. Housing is now just a commodity to be manipulated and controlled for the benefit of a select few who have means and opportunity to possess it. We wail over gun violence in schools, crime in the streets of San Francisco and New York, and lives lost to addiction. But we didn’t learn from Columbine, 9/11, or Sandy Hook. We didn’t learn from investment bubbles and corporate malfeasance two decades ago that took down families who weren’t even party to the machinations. We’ve picked teams and declared war on every one. Democrats feel like they’re superior to everyone. As long as they vote blue, it doesn’t matter that they fight against affordable housing projects in their neighborhood, enable their children to be bullies and hoodlums, or expect their employees to commute hours every day to and from their jobs because they won’t pay them enough to live near work. The GOP cares about protecting zygotes and blastocysts, but not infants, children, or adults (unless they are white, wealthy men). We accept opinion as fact. We question nothing.
I would argue that housing is the solution to many of our country’s ills. Owning a home gives people dignity, affords them pride, provides stability and a financial foundation. Being able to afford rent AND save money for future goals, be they buying a home, starting a business, travel, education, what have you, gives people hope, a sense of fulfillment. Having a stable home life gives people roots and teaches compassion and responsibility; it gives them access to education which in turn gives them opportunity and hope. Without hope, dignity, and stability people fall into crime, drugs and alcohol, unwanted pregnancy, and the associated cycle of dealing with law enforcement, courts, fines, prison and the associated struggle to find work, love, and hope. Joe Biden’s children have homes AND drug addictions – they get a free pass. A homeless teen or Section 8 recipient gets no such free pass, they’re branded by their paperwork in the system. If they screw up, or are even suspected of screwing up, they lose their shelter, such as it was.
It’s time to start asking blunt questions about our housing situation. It’s time to demand transparency about how many homes are owned and by whom and where they are and if certain corporations or individuals are manipulating the market.
It’s time to have serious discussions about what we’re willing to sacrifice to build a number of homes to satisfy alleged demand and create a surplus that will finally drive down prices. Are we willing to cull those resources, destroy more habitat, force people to live in tiny dormitories just so a small percentage of people can own an enormous share of homes?
Are we willing to continue our addiction to oil and gasoline because we must buy a car for every household member to be able to drive hundreds of miles each, every week, to commute to work because we can’t figure out how to allow those who can to work from home, live near their jobs, or live in a community where they can share a single car? Are we seriously okay with asking people to spend hours every day on public transportation because we won’t let them live in affordable housing near their jobs or pay them enough to be able to afford a car?
Can we honestly look in the mirror every day and say our hands are clean of the blood spilled at Uvalde? Or are we all culpable because we allow narratives to be spun out of thin air, devoid of facts, transparency, and proof? Are we not accountable for the state of our nation given that we keep electing the same people to do nothing, consoling ourselves that at least our team won – even if they are totally corrupt in every way?
Is this the best we can do? And if not, are we satisfied to continue to stick our heads in the sand while the world burns around us?
*I, personally, make exceptions for journalists like Julie K. Brown and Carole Cadwalladr and politicians like Ron Wyden who genuinely seem to see the problems and want to right them.
** Garbage Disposal Math: Numbers that are created from whirling together random bits of information cooked up for a booze-soaked economists’ dinner party – basically, a random hodgepodge of leftovers from a cherrypicked, concocted menu of data.
Disclaimer: I’m one person trying to read a situation through a shattered lens. I’ve done my best to be accurate with regards to my numbers and names, but data is often unclear and sometimes reported incorrectly. I do not have a fact-checking team, an editor, or a legal team to verify the data presented here or protect me from thin-skinned bullies who may see fit to attack my attempt to shed light on this topic. Due to those issues, I want to make it very clear that everything in this story is my opinion, based on the facts available to me. If I am wrong, if the housing market and her occupants are healthy and happy, I will, in the words of Tim Minchin, “[T]ake a compass and carve ‘Fancy That’ on the side of my cock!”
No comments:
Post a Comment