Same as Child Care – market concentration and lack of antitrust regulation means massive “corporate extraction” and higher prices.
intercst
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The story doesn’t included existing homes being purchased as rental property.
Investor home purchases rose 3% year over year in the second quarter amid strong demand from renters, many of whom can’t afford to buy homes.
Investors bought 1 of every 6 U.S. homes that sold—purchasing $43 billion worth of properties—and 1 of every 4 low-priced homes that sold.
Single-family homes were the most popular property type among investors, making up 69% of their purchases.
Investor home purchases rose most in San Jose and Las Vegas, and fell most in Fort Lauderdale and Providence.
Investor purchases of U.S. homes rose 3.4% year over year in the second quarter—the largest increase since the second quarter of 2022.
The story also doesn’t mention zoning laws that make moderately priced housing developments difficult.
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One block away from me, they knocked down 2 single family homes and are now building 18 rental townhomes on the combined lot. If you want affordable housing, that’s the kind of thing that needs to happen.
A one acre lot in my neighborhood now costs over $700,000. I can’t imagine putting less than a $1.5 MM home on a lot that expensive
intercst
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And this is a big change from 2020/21/22 when investors were going gangbusters buying properties to use for STR (Short-Term Rentals) like Airbnb. Now with the STR business deep in the dumps, and with interest rates still somewhat high, many of those properties are not profitable anymore. That means that the owners are suffering from negative cash flow, and as the months pass, they get more and more motivated to sell. Some of those will [attempt to] be changed to regular annual contract rentals, but in many cases the numbers won’t work out because they overpaid based on the higher STR total revenue (20 days per month * $120/day is $2400, and a monthly rent of $2000 is substantially less), so they will ask for high rents and won’t get them, leading to more months of big negative cash flow. Then they will sell at a loss just to staunch the bleeding. Some will sell to investors (who will put in higher equity if rates stay high) who will do annual rentals, but some will sell to new owners at lower prices. And if interest rates drop enough, many new owners will be attracted back into the market for homes. As long as there isn’t a deep recession with many job losses, it can all work out.
As far as new construction goes, the builders, especially the large builders, use every trick in the book to keep the listed and recorded prices high, while giving all sorts of concessions (rate buydowns, improvement credits, etc) to buyers that lower their effective price.
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Tight markets with plenty of buyers can drop. They are dropping in several major markets.
The intrinsic value is the intrinsic value. Things will revert to that value.