How large investors are ruining the housing market

The housing market is the least affordable it’s been in decades and politicians are looking for someone to blame. The latest target is large investors.

While some large investors are negatively impacting our local Huntsville market, the problems go way beyond this. Lack of housing supply from tightening lending standards from the great recession, deficit spending spurring massive inflation, and the Fed keeping interest rates too low for too long have been the primary drivers of our current housing crisis.

The last item, the Fed keeping interest rates low for too long has helped large investors make some bad decisions that we’re all now having to live with in Huntsville. With cheap money available, apartment syndications and build to rent communities have exploded in our market. On the last 3 miles of my commute, I passed over a dozen of these projects. 

The other thing that has happened is Wall Street getting involved on main street in buying up single family homes. There’s always been a percentage of homes that investors have purchased. Recently that number has increased from 18% to 25% and that extra 7% affected first time home buyers during the covid years.

We’ve got to slow this trend down to help protect the middle class and the American Dream. Homeowners on average have a 40X net worth vs renters – $396,200 vs $10,400. We’ve got to stop the homeownership decline and #RenterNation. 

Real Estate Investing can be a positive thing. Investors helped stabilize the market during the great recession, rehab homes and help fund a lot of the growth in our area.

So how do we solve this?

In my opinion, a great place to start would be to offer a tax incentive to real estate investors to sell their inventory to first time home buyers. The majority of homes are still owned by small investors, so the biggest short term impact would be to target these homeowners.

Long term, we’re going to need to keep an eye on wall street’s single family home buying and potentially limit their purchases and also out of state purchasers, so that we don’t all end up renting from a hedge fund someday.