The American Dream of Owning Your Own Home is Fast Fading
by John Lawrence, April 26, 2019
Single family homes are being bought up by hedge funds while young people entering the housing market have too much in student loan and credit card debt to afford to buy one. So they are in the position of renting from a hedge fund most of which are ruthlessly and relentlessly raising rents through the roof. Few if any college graduates these days will ever own their own homes unless they go into the FIRE sector of the economy: that's finance, insurance or real estate. The financialization of the economy has left little room for anyone else except celebrity athletes and movie stars to own real estate.
Sovereignman writes:
Single-family homes were one of the last bastions of investment freedom for the little guy.
Last week a huge merger was announced between Invitation Homes (owned by private equity giant Blackstone Group) and Starwood Waypoint Homes (owned by real estate giant Starwood Capital).
If the deal goes through, the combined entity would be the largest owner of single-family homes in the United States with a portfolio worth over $20 billion.
And this is only the latest merger in an ongoing trend.
Three years ago, for example, American Homes 4 Rent bought Beazer Pre-Owned Rental Homes, creating another enormous player. A few months later, Starwood Waypoint bought Colony American Homes.
And of course, Blackstone was one of the first institutional investors to start buying distressed homes, forking over around $10 billion on houses since the Great Financial Crisis.
At one point, Blackstone was reportedly spending $150 million a week on houses.
So is it any wonder that the middle class is disappearing? US Census Bureau statistics show that over the last decade there have been an increasing number of rental households and a decresing number of households which own their own homes. Sure we're approaching full employment, but most of the new jobs being created are for waitresses and bartenders. Wages are totally stagnant. They have about the same purchasing power as they did 40 years ago. Most wage gains have gone to the top tier of wage earners. Since 2000, usual weekly wages have risen 3% (in real terms) among workers in the lowest tenth of the earnings distribution and 4.3% among the lowest quarter. But among people in the top tenth of the distribution, real wages have risen a cumulative 15.7%, to $2,112 a week – nearly five times the usual weekly earnings of the bottom tenth ($426).
So it's clear what's happening. Foreclosed on homes and distressed properties are being scooped up by the likes of Blackstone Group. Or in other words - Wall Street. The very financial firms that caused the 2008 financial crisis which caused many people to lose their homes to foreclosure are now buying up those homes and turning them into rental properties. Then they raise the rent. Home prices and rental prices are increasing by the day. Those lucky enough to own their own homes are prospering. Everyone else is faced with the situation of paying higher and higher rents. The money being poured into the economy by the Federal Reserve, which goes mostly to the rich like those operating hedge funds, raises asset prices across the board. This does not help the average wage earner who is having his rent go up or is trying to buy his first home.
