large investment companies buying up homes, turning people into renters

Discussion in 'Economics & Trade' started by kazenatsu, Jun 12, 2021.

  1. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Let me put it to you this way. How much would you be willing to pay for a bottle of water at the store?
    Now, how much would you be willing to pay for a bottle of water at the store if there were no other options, that store was the only place you could get water in that area?
    Can you see the difference?

    That question has already been answered and explained to you.
    It seems it is too complex for you to be able to grasp.
     
    Last edited: Jun 21, 2021
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  2. OldManOnFire

    OldManOnFire Well-Known Member

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    This is nonsense...you're saying ONLY the corporations can buy properties and individuals cannot?

    This is a diatribe about nothing...
     
  3. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Individual smaller buyers cannot come together in an organized way to drive up prices so that they will receive the full benefit of that.

    Do you understand the concept of what a monopoly is, and what "cornering the market" means?

    If you are trying to understand it from a more mathematical perspective, maybe I can cite for you "the prisoner's dilemma" in game theory. If only a few buyers try to buy up the properties in that city, they will not reap any special benefit and may even suffer some loss. It takes a certain volume of buyers to be able to "build up enough momentum" where the market starts to be cornered and prices start to go up. Does that help you understand at all?

    A humungous corporation can buy up a large number of properties while holding rent prices down until they are finished buying up all the properties they want to own. If individual separate buyers were doing this, prevailing market rent prices would start going up, and this in turn would put pressure on home prices to rise, creating a sort of counter to speculators buying up more homes, and as the public was noticing home prices rapidly going up, there would be more people choosing to buy while home prices were still not too high rather than deciding to be renters in the near future.

    If you are trying to visualize it from the perspective of market equilibrium forces, there may be two different market equilibrium points, two different "modes". The equilibrium point can shift to the other mode if the market gets cornered.
    You might think the demand curve remains constant. But what you really have to understand is there are two different elements to that demand curve: buyers and renters. The rent demand curve can increase in response to a point on the demand curve, in a non-linear way. This won't really be a normal 2-dimensional supply-demand graph. There is a certain element of feedback effect.
     
    Last edited: Jun 22, 2021
  4. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Another hypothetical example that illustrates how this type of phenomena could work is the following:
    There are 7 bottles of water and 3 people who each need 1 bottle of water, and then will each need another 1 bottle of water tomorrow.
    However, they only have enough money to buy 1 bottle of water today, and then will be given additional money to buy water tomorrow. If they want to buy more than one bottle of water today, they will need to borrow money at a very high interest rate.
    The most financially optimal thing for those people to do is to buy 1 water bottle today and 1 water bottle tomorrow.
    However, suppose one of those people has the money and gets the idea into their head that they are going to buy up 4 bottles of water on the first day, instead of 1. Even though they only need 1 bottle of water today and will need one bottle of water tomorrow, and derive no additional benefit to themselves from more water. What will then happen? Suddenly the two other people will realize if they only buy 1 bottle of water on the first day, there will not be enough water for both of them on the second day. One of them will die.
    The two people will start engaging in a bidding war, trying to borrow money to get that last water bottle, and being willing to get into great debt and paying an exorbitant additional rate of interest to do so.

    Normal market forces (if we were talking about individuals buyers) would have been prevented from naturally drifting towards this direction because, remember, there was a surplus water bottle here. No one is going to benefit if someone buys up just that one surplus water bottle, because there still remains enough for everyone else. A certain critical barrier has to be breached before people begin panicking.
     
  5. OldManOnFire

    OldManOnFire Well-Known Member

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    You're saying only the big money can buy up homes and jack up the rents. I'll say it again; they cannot 'jack up' the rents any higher than what consumers are willing to pay. And again, there are no laws about buying properties for purpose of renting. There are no laws that dictate how many properties a single entity can purchase. If rents rise beyond what people are willing to pay, no matter the reasons, they need to move to more affordable housing. Many times a company will buy distressed properties, invest in renovation, then charge higher rents, and again this is a lawful practice. You may not like what a company is doing but as long as there are no laws...it's a nothing burger!
     
  6. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I've already explained this to you. The current market equilibrium that consumers are paying is still much less than the maximum that consumers would be willing to pay (if the current nature of supply changed).

    You might try to make the philosophical argument the buyers have the right to do this - even if it is part of a scheme to corner the market - but it is exploitation.
    It is a form of exploitation that goes beyond any normal type of exploitation that exists in a free market. An analogy was drawn to the economic phenomena of monopolies (although that may not be exactly the same).

    Like I already explained to you, I'm a pretty strong proponent of free markets being the most efficient way to conduct economic activity, but even I see a potential problem here.


    (You will notice in another thread I even defended price gouging during disasters: Price Gouging or Opportunity
    By the standards of most of the people debating in this Economics section of this forum, that would probably make me an "extreme" free market defender.)
     
    Last edited: Jun 23, 2021
  7. Tejas

    Tejas Banned

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    large investment companies buying up homes

    That's an inflation warning sign.

    Rents will be going up too.

    Investing in Real Estate Investment Trusts (REITs) will be popular.

    .
     
    Last edited: Jun 23, 2021
  8. Tejas

    Tejas Banned

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    Willing or not... renters will have to pay... or live with relatives or become homeless.

    Maybe this will bring back the old "boarding houses"

    .
     
  9. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Boarding houses have already been brought back for some time now in places like New York City, Southern California and the San Francisco Bay area.
    In San Francisco there are "middle class income" people living in them.

    Probably a completely separate topic but I just thought I would throw that in here.
     
    Last edited: Jun 23, 2021
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  10. Tejas

    Tejas Banned

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    Interesting... thanks for sharing.

    I've only seen boarding houses in old movies... and wondered why they ceased to exist. Now I know they have made a comeback.

    .
     
    Last edited: Jun 23, 2021
  11. Tejas

    Tejas Banned

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    My house in Dallas has doubled in value the last few years. Even with high property taxes and maintenance, it's still cheaper for me to live in my paid off house than in a rental with much less space. But that's only because I bought my house in a lower cost real estate market. I could not afford to buy a house like mine today.

    .
     
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  12. OldManOnFire

    OldManOnFire Well-Known Member

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    It's not a philosophical argument...it's a lawful process.

    There is no parallel to monopolies...these investment companies can lawfully purchase as many properties as they wish and charge whatever rents they wish.

    These companies that do this are also at risk for failure if/when rents don't cover the mortgages, etc.

    Renters pay a property owner to live/use their properties typically for the short-term. Even though there are some consumer protections, renters must deal with changes in landlords, changing prices, etc. including being forced to vacate when given proper notice. The idea that some company wishes to buy lots of inventory in a given area, including increasing rents, is a lawful process. The market will be the decider...
     
  13. OldManOnFire

    OldManOnFire Well-Known Member

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    It's a lawful process...like it or not. Renters make the final decisions what they need to do; how much to pay, where to live, etc.
     
  14. cristiansoldier

    cristiansoldier Well-Known Member

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    Who is it that you are advocating to solve this problem? This seems like a standard economic issue. There are no monopolies. The only barrier to this market is money but that is true with many things. People just see an opportunity for profit and this are investing in real estate. Certainly there is an advantage for those with a lot of money but that is nothing new.

    If you plan is to start a cancel culture type movement to boycott certain companies that you think are unfairly driving up prices then I fully support you and the right to do so. If you want government to intervene then I am totally against it. This IMO is just the free market and capitalism at work.
     
  15. Moonglow

    Moonglow Well-Known Member

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    I used to complain that my first home in 1986 was too expensive at 40k
     
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  16. Tejas

    Tejas Banned

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    My father bought my childhood home in the 1960s for around $12,000. At the time, that house was two years old in a nice middle-class neighborhood. Decades later, I inherited that house from my father and lived in it for awhile. But the neighborhood had declined and the house needed a lot of work. So I sold it "as is" for around $50.000 to buy a nicer bigger house in a nicer neighborhood which cost three times as much. Now my current house is worth twice more than I paid for it... and the home prices here in Dallas are still going up.

    .
     
    Last edited: Jun 23, 2021
  17. Hoosier8

    Hoosier8 Well-Known Member Past Donor

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  18. Hoosier8

    Hoosier8 Well-Known Member Past Donor

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    From what I understand REITs are not going to be popular as corporations are buying the properties to turn them into rentals. I get emails and calls daily for one of my properties.
     
  19. Tejas

    Tejas Banned

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    Yes, I've heard that too... and it doesn't surprise me. The US government has been systematically destroying America's White racial foundation [and religious, moral and cultural foundation] since the end of WW2.

    .
     
    Last edited: Jun 24, 2021
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  20. Tejas

    Tejas Banned

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    REITs are investment companies who own/operate income-producing properties.

    BlackRock is a single-family home REIT


    .
    .
     
    Last edited: Jun 24, 2021
  21. Hoosier8

    Hoosier8 Well-Known Member Past Donor

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    I know but I read that somewhere about REITs. Can’t remember where. Might have the reason wrong.
     
  22. Tejas

    Tejas Banned

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    Last edited: Jun 24, 2021
  23. Tejas

    Tejas Banned

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    I'm no expert. I recently saw a TV news report about how REITS would be good investments in an inflationary environment and how REIT companies are now buying up single family homes. So it appears the rich elite are planning for more inflation ahead.

    .
     
  24. modernpaladin

    modernpaladin Well-Known Member Past Donor

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    This is one of those rare issues where I favor more strict, possibly more authoritarian controls. I've outlined it in far more depth here on this forum more than once (predicting this very outcome, ftr), but in brief, we need to decenticize the practice of hording residential property with taxation in such a way that allows rentals for those who prefer not to own but otherwise decreases residential property values to a point where a mortgage is just as affordable as a lease.
     
    Last edited: Jun 24, 2021
  25. Robert

    Robert Well-Known Member Past Donor

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    I am a long time Real Estate Broker who has seen all of it happen.
    I also appraised property.
    I also loaned money to investors.

    Cities are magnets for money. And cities with status attract a lot more.
    cities with fairly easy employment fare well.
    YES this firm can impact a major market.
    But it will drive up rental amounts. As to driving up housing prices, well, a rule says as the rent goes up, values go up.

    We will always have those who decided too late to own a house. Why own when you are mobile? Why tie yourself down and lose money to guys like me, Real Estate Brokers?

    If some of you notice, a lot of Brokers are now cheap buck artists. They persuade you to use them by going down to 2 percent or less. Best way to hire a bad broker is those charging cheap commissions. They know what they are worth.

    Can you stop the big hitters from buying up areas? Well if the sellers won't sell they can't buy. Can they?
     

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