June 17, 2021

Pricing the American Dream Out of Reach

Investors are drastically driving up the cost of real estate for the middle class.

According to the National Association of Realtors (NAR), home prices are up 19.1% from April 2020 to April this year, as every region in America recorded price increases. “This is a record high and marks 110 straight months of year-over-year gains,” it stated. The NAR also explains that much of this price rise can be attributed to low inventory. At the end December, housing inventory stood at just 1.07 million homes for sale on a national level, marking the lowest number of available homes in 39 years. And though inventory has rebounded somewhat, rising to 1.16 million units in April, it’s still down 20.5% from last April. These realties, coupled with low interest rates that make home buying more affordable, can be attributed to traditional market forces. But what if the market is being artificially manipulated?

In a Wall Street Journal article titled, “If You Sell a House These Days, the Buyer Might Be a Pension Fund,” columnist Ryan Dezember explains that pension funds and other investors looking for higher returns on their capital investments are not just buying single houses but entire neighborhoods.

“D.R. Horton Inc. built 124 houses in Conroe, Texas, rented them out and then put the whole community, Amber Pines at Fosters Ridge, on the block,” Dezember writes. “A Who’s Who of investors and home-rental firms flocked to the December sale. The winning $32 million bid came from an online property-investing platform, Fundrise LLC, which manages more than $1 billion on behalf of about 150,000 individuals.”

Far more important, Dezember added that the home builder “booked roughly twice what it typically makes selling houses to the middle class — an encouraging debut in the business of selling entire neighborhoods to investors.”

Encouraging to whom? Real estate consultant John Burns, whose firm estimated that approximately 20% of homes are being bought by someone who never moves in, sees the writing on the wall. “You now have permanent capital competing with a young couple trying to buy a house,” he warned. “That’s going to make U.S. housing permanently more expensive.”

Dezember also recounts similar stories in his book, Underwater: How Our American Dream of Homeownership Became a Nightmare. He reveals that the world’s largest real estate investor, Blackstone Group, has bought other corporations such as Invitation Homes, which is on what he called a “buying spree.”

It is a spree fueled by $10 billion being used to buy $150 million worth of houses — per week.

The genesis of these sales was the real estate crash of 2008. Three years later, corporations began buying large amounts of foreclosed homes at steep discounts, even as banks were making it harder for regular home buyers to get a mortgage. When that proved enormously successful, they moved from buying foreclosures to buying on the open market, snapping up suburban houses and renting them out, often charging those renters more than they would have otherwise paid in rent or a mortgage.

And while this phenomenon didn’t exist a decade ago, by 2018, corporations were purchasing up to one in 10 suburban homes. The result? “Between 2006 and 2016, when the homeownership rate fell to its lowest level in fifty years, the number of renters grew by about a quarter,” Dezember writes.

Unfortunately, he believes this is just the beginning, as he says these corporations are both wealthy and technologically proficient enough to manage “multiples more” with “ruthless efficiency” — and eviscerate the nation’s middle class in the process.

Unsurprisingly, government is the real culprit here. More than a decade of minuscule interest rates and massive money printing engendered by the Federal Reserve to initially bail out Wall Street at the expense of Main Street has morphed into little more than a cover for Congress’s flagrant — and oh-so bipartisan — fiscal recklessness.

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

Yield — or power? Earlier this year, the World Economic Forum posted a video stating what its “Great Reset” predictions were for the world by 2030. The very first one features a smiling, bearded young man. The caption underneath? “You’ll own nothing and you’ll be happy.”

The first part might be accurate, but the second half is a flat-out lie. “Home-price appreciation has historically been how Americans achieve financial prosperity,” Dezember writes. “Unlike stocks and bonds, ownership of which is concentrated at the top, houses are widely held. Roughly half of housing wealth is owned by America’s middle class.”

Are we supposed to believe Americans will be happy without prosperity and personal property? Or that renters and owners are equally invested in maintaining the quality of their properties — and the quality of life — in their neighborhoods?

Nothing better defines the American Dream than owning a home. Denying millions of Americans that opportunity — and just as critically, the sense of responsibility and personal freedom that comes with it — will manifest itself in far more deleterious ways than simply creating a nation of renters. If one can’t own anything, why get married, why have kids, and why plan for the future, when the best one can hope for is being beholden to a more benevolent landlord than the previous one?

If this trend continues, entire generations of Americans will literally be priced out of prosperity. There’s no surer road to serfdom than that. Tragically, for a nation looking more and more like a corporate-controlled oligarchy instead of a constitutional republic, that may be precisely the intention.

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