THE WOLF STREET REPORT: The Big Boys Are Back Financializing Single-Family Houses

As after the last crisis, fueled by ultra-cheap money, they’re taking financialization of the housing market to the next level: Now it’s buy-to-rent, build-to-rent, sale-leasebacks, and buy-to-sell (you can also download THE WOLF STREET REPORT wherever you get your podcasts).

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  157 comments for “THE WOLF STREET REPORT: The Big Boys Are Back Financializing Single-Family Houses

  1. andy says:

    Central bankers must feel tarring and feathering is not beyond realm of possibilities if they let this house of cards fold.

    • Cas127 says:

      “Tarring and feathering”?

      When their multi-decade, currency destroying delusion goes, it will be…

      “Hung from an overpass, set on fire.”

      Their only hope will be if the chaotic ruin of the nation precludes tracking them.

      I assume (like the rest of rump DC) they will seek sanctuary with China and then be returned to America and turned out as a Vichy facade.

  2. Andre says:

    The bubbles in equity and property assets continue to be inflated through the ultra low interest rates and money printing in defiance of all free market principles. This can not last forever and when the bubbles burst the Fes will much to answer for.

    • Andre says:

      Apologies” …the Fed will have much to answer for”

    • Old School says:

      My friend’s son just sold his home just outside Raleigh for $605,000 which was around $20,000 over list. Took three days. Inventory very tight.

  3. Robert Meier says:

    The Big Boys back in financializing single-family real estate

    reminds me of Biblical Aphorisms, “As a dog returns to [eat] his own

    vomit…and the sow, after washing herself, returns to wallow in the

    mud…just as fools repeat their foolishness”.

  4. cb says:

    This is an an example of Capitalism Collectivism. Pooled money collectivism by private equity, coupled with expansive cheap money created by the FED, pits the insider group against the individual. We enter into feudalism with Lords and serfs. The lords created by arbitrary edifices created via limited liability through corporations and LLC’s. The serfs subjected to special interest groups favored by the creators of money from nothing ,,,,,,,,,,,, the FED and banking class. The serfs also subjected to the Wall Street and Private Equity class, favored by government laws which direct money to Wall Street via devices like 401k’s and other deferred tax vehicles.

    We are full on into concentrated ownership, wealth and power, which is the ruin of free markets. The is nothing free market about a system where a banking class gets to create money and distribute it, picking winners and losers along the way.

    End the FED.

    • No Expert says:

      Isn’t the ‘free’ part supposed to mean free from regulation from the nation state? So to prevent banks doing their thing to ensure ‘free markets’, you would need to stop them i.e. not ‘free’?

      • Retsdon says:

        Every society in recorded history has had rules in place to try and curb anti-social behavior and behavior that undermines the social cohesion of society. When wealth is being systematically stripped from the population at large and concentrated in the hands of a handful of chosen corporations by rigging the playing field (vastly different rates of interest each has to pay for one thing), then the cohesion of society is under threat. A free society doesn’t mean you’re free to rob your neighbor, and neither should a free market.

        • cb says:

          Good point. In America, the sermon is all about “free market capitalism” in an attempt to gaslight and brainwash the masses to support what is in fact FED/Banker/Wall Street capitalism and a conscious effort to reduce most Americans to wage/debt slavery.

          Only in America will you get a bunch of broke hillbillies rallying to the clarion call of FED favored/created billionaires.

          (Where is Unamused when he’s needed to add some color to this commentary?)

        • Fat Chewer. says:

          Well said.

      • According to Michael Hudson the term “free market” originally meant freedom from a rentier class. It is a travesty and a reactionary counter-offensive of rentier interest to reinterpret it as freedom from regulation.

        • Michael Grace says:

          I doubt if this ever existed in recent time. All empires needed their “yield” from the “market” to afford existence. Without “tax” there can be no “State” I mean everybody’s got to eat.

      • Trailer Trash says:

        The “free from regulation” nonsense is a distortion. According to economist Michael Hudson: [1]

        “what they [Adam Smith et al] were for was for a market free from economic rent, free from monopoly rent, and free from usury and predatory finance. So the whole history of economic thought has been rewritten and turned upside down to make it appear as if it’s the exact opposite.”

        [1] “Debt Deflation and the Neofeudal Empire”

        • Happy1 says:

          In Adam Smith’s time, there was not an unelected regulatory state which confiscates private wealth by stealth, limiting what a person can do with their property and capital.

          And the regulatory state has now been captured by those with wealth such that the large businesses are favored because they have the resources to deal with legal costs that are entry barriers to the little guy.

          So while it is true that Adam Smith wasn’t talking about freedom from regulation, that is only because the regulatory state didn’t happen until the 1900s. It is clearly a very large threat to freedom and to my mind, is part of the reason for monopoly in several industries.

    • cb says:

      Whether Government corrupted Capitalism or Capitalism corrupted Government, either way it’s a sorry state and looking like fascism.

      Hence the rise of AOC, Warren and Sanders ,,,, with I suspect much more to come.

      • Trailer Trash says:

        “looking like fascism.”

        The late expert on fascism Benito Mussolini said:

        “Fascism should more properly be called corporatism because it is the merger of state and corporate power.”

        So yeah, we crossed that bridge by World War II when the US was a command economy and all effort was focused on producing soldiers and bombs.

        From Wiki:
        “In 1942-45, WPB [War Production Board] supervised the production of $183 billion worth of weapons and supplies, about 40% of the world output of munitions.”

        Since WW II the corporations have consolidated control through regulatory capture and financing Congress Critters. Faithful servants of the empire are also rewarded with cushy academic positions funded, once again, by the corporations.

    • Old School says:

      Been reading the four part series on history of financialization on zero hedge. It’s a long but informative read. It’s above my pay grade so to speak, but I recommend it to all who are trying to understand history of money and power.

      Other thing I read was stocks in the 100 percentile for valuation and treasury bond yields in 100 percentile lows as of a couple of weeks ago. Investors are a little trapped I would say. Makes shorting an option, but I will try to wait for better choices.

    • Stoneweapon says:

      The parasitic banking class: print money and distribute it to corner all markets so the human mass will be reduced to a rent seeking social order.

  5. William Smith says:

    What is the average term of sell to rent scheme? Ie. Family X sells, then rents the home. Family X prudently saves all the money but loses all jobs (thus relying on savings). How long before there is a forced sale (the “term” of the scheme) and family X is out on the street? In other words: how long does this scheme kick the can down the road before it blows up? And, what percentage of the population will eventually become family X before the Fed is forced to introduce “basic income”?

    • Kalle Anka says:

      What happens right now is that people are losing their jobs on a monumental scale and the banks are giving them payment holidays of 6-12 months (every EU country has introduced this). IASB was quick to point out that these are not going to lead to triggers in ECL (expected credit loss) models in March 2020.

      When the banks have to recognize these non-performing loans in their balance sheets next year, I suspect that the ECB will be turned into the biggest trash bond bank in the world/alternatively that the EU starts its own trash bank and socializes the losses on mortgages all over the EU.

      That being said, mortgage rates stays low forever, but banks will have to take into consideration the increased risks in the form of higher margins on loans. Interest as an risk measurement instrument is already dead and by-passed at this stage.

    • GirlInOC says:

      I don’t know but some brainiac already came up with a new start-up app (called Civvl) aimed at the gig eviction economy! Download the app & get sent to a new house near you to throw a family to the streets!

    • Beardawg says:

      Willian Smith

      Related question (devil’s advocate) – what percentage of Family X homes are resultant from strategic forbearance and then behind the 8-ball with big screens in the living room and jet skis in the garage, thus $X amount of money offered to Family X to stay in the house and pay rent instead of mortgage is like a God send? I don’t have the numbers, but I posit it is the majority of Family X.

      • VintageVNvet says:

        Not family and friends the last crash bd,
        First, one or both adults lost good jobs, then went through foreclosure process with no money to stop it, then, as economy picked up again, rented back from HF buyer of their homes.
        Several others close enough for me to want it made law that no entity other than sole proprietor can own SF homes, and no entity owns more than what they can maintain in good healthy condition; this serves the individual and the local community.
        Otherwise, more run down property accelerates the downward spiral of the community as has clearly been seen in many major cities in USA recently. PEs and HFs just take ”write down” on their taxes as some properties deteriorate, and just don’t give a damn.

      • cb says:

        Hey Beardog –

        In California you can get a brand new jet ski for under $10,000. You can get big screen for under a $1,000. An entry level 3 bedroom 1 bathroom house in a mediocre school district starts at $600,000 and rent runs about $2,800.

        It’s not the “luxuries” breaking the middle class, it’s housing costs, not to mention education and healthcare.

        Housing cost way too much. It’s killing upstart families to the extent many families are never started, or break-up. We have a sick society and the practices of financialization have been a big contributor. A large part of the population has been enslaved by the moneylender class.

        • cb says:

          And by moneylender class, I refer specifically to the class of vermin that get to create the “money” they loan, out of nothing but a keystroke. The damage all who exchange their honest labor to earn a living.

        • ru82 says:

          Lots of apartment are going up too. That is were people will need to live if they cannot afford a home.

        • Stoneweapon says:

          The greater Toronto area rents and entry level private homes is similar to San Francisco and New York City, a close contender for the most expensive 3rd place in North America. Many families are pairing up under one roof. I encourage my kids (currently both pursuing Masters degrees in the sciences) to look outside the GTA (Greater Toronto Area) for work and cheaper housing. There’s far fewer places to go in Canada for employment than the US. Maybe is the younger generation was able to organize a mass migration to the cheapest parts of Canada and buy land, employment would have to follow?

  6. “If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years,” said David Lereah, chief economist of the National Association of Realtors and author of “Are You Missing the Real Estate Boom?” “It’s as if you had 500,000 dollar bills stuffed in your mattress.”

    • Arizona Slim says:

      $500k in the mattress? Sounds good to me!

      Oh, wait. The financial gangstas won’t be making any money if we do that.

      • Frederick says:

        Ten kilos of gold in the mattress may not be as comfortable but Yourll sleep a lot better than holding fiat

    • Turtle says:

      Hah, we paid our mortgage off on year 9 and saved all kinds of money on interest. Now we pour what was our principal and interest payments into index funds for the long-term, having early retirement in mind.

      Never take financial advice from anybody making a living in real estate. They want your money and are willing to make you into a gambler or a slave if that’s what it takes for them to get their paycheck.

      • California Bob says:

        When you were allowed to deduct ALL mortgage interest on taxes it was reasonable to keep the loan in many cases (I paid cash for a nice car with a HELOC and was able to deduct the interest). The GOP just couldn’t stand for the ‘little guy’ to get a tax break.

        • Paulo says:

          That certainly used to be true for US citizens in some states, but it does not compare to never having to make another payment or worry about employment. That is what being out of debt does.

          I paid my house of years ago and it allowed me to retire at age 57, and I am a blue collar guy. Year 8 of retirement at age 65. The money in the mattress is a very nice cushion :-) The investment stampede is just numbers on a screen as far as I am concerned.

        • California Bob says:

          Agreed. Except for the mortgage, and a vehicle I bought before I got the HELOC, I WAS debt-free for the 20 years I lived in my house, and was paying it back with depreciated dollars (while my income overall rose).

          Don’t forget the ‘money in the mattress’ is worth less today than it was yesterday.

        • Happy1 says:

          Little guy? Mortgage over 750K is for “the little guy”?

          And how about the SALT deduction, 90% of which flows to the top 10% of earners, Dems want that back, are they looking out for the “little guy” either?

      • Frederick says:

        Buy and sell online without parasitic brokers if at all possible or through word of mouth locally I’ve done that numerous times and it’s very satisfying to eliminate that nonsense

    • Lawefa says:

      My first question is this…does David Lereah have his home.paid off? If not, throw a muzzle on it. Dumbest quote I’ve ever seen. I sacrificed early in my career to save enough to pay cash for my home. David Lereah obviously doesnt understand what the term financial freedom really means.

  7. Mark says:

    It’s disgusting. Disgraceful. Taking advantage of working people. As another poor working class white guy, I’m not happy, losing my job, losing access to secure housing and the like, whilst Blackrock and billionaires buy it all.

    • No Expert says:

      Thats why you need to vote! Oh no wait, didn’t we already try that the last couple hundred years?

    • Trinacria says:

      Mark: your are right, but you are too kind with the adjectives you are using to describe this. The stuff that I am thinking cannot be printed on a fine site such as this. The insanity continues, fueled in large part by worthless money. These clowns are going to own assets in a dark dystopian society that is setting up for a crash. At some point these renters will become campers, then the investors will need to fund the mortgage payments as well. Every day we seem to wake up to more insane garbage…when will this rubber band finally snap ?

      • Petunia says:

        They are provoking the peasants and you know how that turns out.

        • GirlInOC says:

          I remember before Covid people here poo-pawing the idea of an uprising from the people…because they were too appeased by capitalism’s gains. I specifically remember thinking ooohh there’s definitely a tipping point, and vast amounts of people living in the streets is a big one. Turning houses into assets- worst idea yet Finance World!

        • Trinacria says:

          I read that private equity is even going after trailer parks now. So, they then jack up rents on the poor. This is a redux of Charles Dickens type stories. These greedy private equity clowns will usher in a society that they will NOT like…maybe some form of socialism that could very well appropriate their hoard. Problem is that what ushers in may not be liked by many innocent people as well. This is all so so so short sighted !!!

        • Xabier says:

          Let’s see: the peasants rebel, and are hanged and crucified?

          One of my ancestors helped put down a revolt in France, a revolution that didn’t work and will never be made into a film.

          3,000 peasants were slaughtered in a town in just one afternoon.

    • Lawefa says:

      Obama administration screwed up big time with the foreclosed housing crisis in the late 2000s. They were rolling out foreclosed houses by the 1000s. Totally, permanently changed the landscape for the housing market and rentals. The car keys to the housing industry were handed to the “big boys” permanently and we aren’t coming back. Mnuchin aka the “foreclosure king” couldn’t foreclose homes quick enough with government backed protection. I’m all for making a buck on rentals but these clowns have taken it to an unsustainable level with LLC ownership in the 10s of thousands. The term “when is enough enough” doesnt exist for them.

    • Frederick says:

      My advice Expatriate Lots of good options worldwide if you are adventurous anyway

  8. rhodium says:

    The financialized rentier economy is like a dark smog cloud that keeps growing over the country.

    You come into the world butt naked, and when you die you can’t take all the stuff you accumulated with you. What do modern feudal lords regret while laying on their death beds?

    • MonkeyBusiness says:

      Legacy? The wealthiest families in Florence, Italy are the same families 600 years ago.

      Baron Zuckerberg. Lord Gates. Supreme Commander of All Private Equity Forces Schwartzman. All have a nice ring to them.

      The rich are different from you and me.

    • Frederick says:

      Rhodium, you are assuming they think like you and me. You would be mistaken in that belief

    • Lou Mannheim says:

      “I should have bought TikTok”

      -Satya Nadella

    • Lisa_Hooker says:

      Rhodium, many probably regret they didn’t get more stuff. It’s the nature of the beast.

    • cb says:

      Rhodium said: “What do modern feudal lords regret while laying on their death beds?”
      _________________________________________

      not getting more …………………….

  9. MCH says:

    Underling????? Oh no,how things have turned in the last few podcasts.

    When will you become Supreme Overlord again? Need to climb back to the top.

    So, may be the play is buy up the SPAC ahead of the IPO and then sell at the actual change in name????

    May be IPOB will shot through the roof like NLKA. If you can’t beat them. Join them.

  10. Kurt says:

    Sounds like with this accumulation it will cave in all at once. Institutional investors will take big losses unless they can find the greater fool.

  11. notbyden says:

    But wait, this new crisis hasn’t even started yet. Aren’t they early to the party?

  12. So long as asset prices keep doubling,
    everyone is getting rich, despite the fraud,
    – mismanagement, and other losses.

    At some point, a black swan may appear,
    making profits&management matter again.

  13. John Taylor says:

    As more people become renters and see landlords as big money grubbing corporations, there will be political reactions.

    In CA we have prop 21 dealing with rent control on the ballot for this coming election.

    My point is not whether this proposition is the right solution, but that investors in these massive buy to rent schemes will inevitably face forms of political resistance.

    Many localities already tend to favor renters over landlords in legal disputes, as corporate landlords generate no public sympathy. This makes the business model much more risky than it would initially appear.

    • BuySome says:

      Hope the wording is simplified, ’cause if there’s any if’s, and’s, or but’s the corporate lawyers will have a heyday twisting it into a giant dry salty pretzle to shove back up the rear depository chutes of voters. What we really need are laws like “You be bad news, We kick the shite out of you”, preferably done at Mullholland Falls like locations.

    • Petunia says:

      Rent control is coming but don’t be deceived in thinking the left won’t fight it. The left has been the biggest supporter of big money real estate. Where do all the tax dollars come from that benefit big RE, they come from enterprise zoning and tax breaks in formerly poor areas. All of these schemes are supported by local politicians in those areas, to the detriment of their constituents.

    • KGC says:

      My reading of Prop 21 is the only people it’s going to hurt are small landlords. Corporations can even costs out across multiple listings, the guy who’s renting out his only other property will no longer be able to adjust his rent to market terms. So he sells, and the Corp. buys him out and you’ve just made it even harder for an individual to own a home.

      Way to go, California!

      • GirlInOC says:

        Prop 21 just gives cities the ability to impose rent control. It isn’t actually a rent control ordinance. And there are limits- no rent caps on Mom&pop landlords and nothing on buildings until they’re 15yrs old.

        The biggest hindrance to housing supply is by far zoning laws, not rent control.

        • Beardawg says:

          GirlInOC

          I admittedly don’t know the ins and outs of Prop 21, but separating the rules for Corp landlords vs Mom n Pops sounds fishy to me. The renting public and politicians routinely lump Mom n Pop into the “greedy Corp” bucket and legislation tends to consistently kill Mom n Pop landlords.

        • VintageVNvet says:

          bd correct on the ”real” effect of rent control IMO,,,
          In any case, one need only look at the current movement in Berzerkeley to see that any rent control ends up being voted by the controllers up to ever greater control and invasion of property rights until, in fact, one has no rights at all, all rights having been ”taken” away.
          When the folks on the walkways of the 8 units next door start throwing things, including poison meat for the dogs, one starts having a somewhat different view of rent control, invasive zoning, etc., etc.

    • California Bob says:

      I doubt he wants to jump into this mud pit, but I’d love to know Wolf’s take on the California propositions. Over the years, I’ve realized that more often than not the propositions will do exactly the OPPOSITE of what they claim they will do, or what you can gather from a casual reading (I rely on takes from a few credible sources). A feeble attempt to reclaim at least some of the power for the ‘common man’ has, to no one’s surprise, been totally co-opted by the moneyed Powers That Be.

      I know I’ll be a NO on Prop 22, despite the pleas of ‘drivers’–probably actors–who don’t understand that Uber and Lyft will fire them all if/when full autonomous driving arrives.

      • Wolf Richter says:

        California Bob,

        1. “I doubt he wants to jump into this mud pit…” Correct.

        2. “I’ve realized that more often than not the propositions will do exactly the OPPOSITE of what they claim they will do, or what you can gather from a casual reading…”

        Correct. My default is to vote NO, unless I really understand who wants this and what it really does, which I rarely do. When I read the text of the prop and can’t figure out what it says, it’s an automatic NO.

        We’ve got some zingers this time, including a $5.5 billion Big Pharma enrichment project, dressed up as a research bond issue (Prop 14). The text of the prop spreads over 20 pages in two densely printed columns (in the back of the Official Voter Information Guide), with a lot of shitty things in it. Long text = automatic NO.

  14. PNWGUY says:

    Another fun side effect of artificially cheap money.

    Despite all the promises that “emergency” cheap money would only be temporary … Will it ever end? Will asset prices ever be allowed to fall? By how much?

    I’m so tired of the fed picking winners and losers. I’m a millenial and I’ve delayed starting my family because I was trying to be responsible, and not buy a $1M+ fixer-upper house just as rates would be increasing.

    But in their infinite wisdom, the fed has decided time-and-again to save the indebted, the overleveraged, and the soon-to-retire asset owners … at the expense of the young, the asset-less, the savers, and those trying to live responsibly.

    Is negative real rates really the new normal? Are we past the monetary event horizon? (Perhaps we have been for 40 years, but we’re only realizing it now?)

    Fine. I’ll pinch my nose and jump into the snake-infested swamp of debt-financed American life.

    ….Or not. Maybe I’ll just never have a family, and my fiancee will leave me… She can find a real man who bought Amazon stock or Bitcoin under 1000 … Sigh. It’s ok, I’ll entertain myself watching Elon put cyborg pigs on mars.

    • California Bob says:

      re: “… the indebted, the overleveraged, and the soon-to-retire asset owners …”

      You’ve described the Covid-Sufferer-In-Chief to a ‘T’ (just wanted to see if this gets past Wolf’s filters ;).

    • Jeff says:

      Do you really think the Fed is looking out for “the indebted, the overleveraged, and the soon-to-retire asset owners”? I can think of some other group of people that the Fed may be looking out for, and may in fact answer to…

      • Caveman says:

        GOP Senator Chris Collins: “my donors told me to pass the tax bill “or don’t ever call me again.”

        Congress….bought & paid for.

        He surprisingly made the mistake of telling the truth.

    • Old School says:

      I will give you my two cents. Big techs will crash 80% plus percent. Price to sales ratio is way too high.

      From what I see in the USA the material cost to build a decent box to live in is less than $100 per sq foot. Labor is roughly two man years. If you have no options less than $500 per sq foot you probably ought to just move to an area that housing is still 3 or 4 times income. There are still plenty of them in USA

  15. Sound of the Suburbs says:

    What is capitalism?
    The classical economists had the advantage of being able to observe a world of small state, unregulated capitalism in the world around them.
    Today’s economists worked up from micro foundations.
    They got totally different answers.

    How different is classical economics?
    Ricardo was part of the new capitalist class and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
    “The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist
    What does our man on free trade, Ricardo, mean?
    Disposable income = wages – (taxes + the cost of living)
    Employees get their money from wages and the employers pay the cost of living through wages, reducing profit.
    Employees get less disposable income after the landlords rent has gone.
    Employers have to cover the landlord’s rents in wages reducing profit.
    Ricardo is just talking about housing costs, employees all rented in those days.
    Low housing costs work best for employers and employees.

    Adam Smith on Profit:
    “But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin.”
    Exactly the opposite of today’s thinking, what does he mean?
    When rates of profit are high, capitalism is cannibalising itself by:
    1) Not engaging in long term investment for the future
    2) Paying insufficient wages to maintain demand for its products and services
    Today’s problems with growth and demand.
    Amazon didn’t suck its profits out as dividends and look how big it’s grown (not so good on the wages).
    Amazon’s shareholders benefit from the rapidly rising share price as it grows so fast.

    William White (BIS, OECD) talks about how economics really changed over one hundred years ago as classical economics was replaced by neoclassical economics.
    https://www.youtube.com/watch?v=g6iXBQ33pBo&t=2485s
    He thinks we have been on the wrong path for one hundred years.
    Small state, unregulated capitalism was where it all started and it’s rather different to today’s expectations.

  16. Endeavor says:

    The Section 8 folks will now be able to rent a new house with the taxpayer picking up 80% of the rent cost.
    Former owners will cash in equity. Will work out great in a failing housing market environment so, of course, housing will be forever rising in cost. Gee.

  17. Minutes says:

    This is a failure of regulation. Investors are fine. This, much like the aftermath of the housing bubble, is government not only picking winners, but doubling down on the losers. Common sense can prevail but it would take those in positions of power to have sensible policies.

    • leanFIRE_Queen says:

      As a saver and renter with a soon to be household of 1, the optimal move is to live in an RV shifting property taxes and state income taxes to the homedebtors the Fed is trying to save.

      I like it! I’m a digital nomad, why lose mobility through housing when work doesnt force me to?

      Bottom line: as long as renters and savers adjust, they turn into winners at the dnd of the story. Mobility and living pre-tax are the two key assets one should aim to retain.

      • VintageVNvet says:

        Even better LFQ is living on a sailboat, ”on the hook.”
        Grandpa built his own 45 footer in his spare time, then lived on it in FL and Bahamas until he was ready for change.
        He had gone back to work to pay SS, and got $100 per month, on which he did his best to live so as not to touch capital…
        Had work from time to time to augment his budget, but otherwise figured out how to live on SS income, as has this grandson…
        Not really too hard when you can get over the constant brain washing of the TV and now internet.

        • leanfire_Queen says:

          > Even better LFQ is living on a sailboat, ”on the hook.”

          Of course!!! I’m getting my international sailing certification AS WE SPEAK! I LOVE water, it relaxes me.

          Watching men on their mini tractors cutting their lawns at peak skin cancer hours noon-2pm and the noise of dogs barking without any control stress me out. Clearly, housing isn’t for me.

          I want mobility, more adventure, less drudgery, and less sensory contamination.

      • Ellie says:

        LFQ,
        Are you boondocking? Staying on campgrounds? I am very interested in this lifestyle.

  18. lenert says:

    Pottersville.

  19. MF says:

    The CARES Act enabled this. It dwarfs the Global Financial Crisis’ TARP by orders of magnitude. There were a few crumbs for “paycheck protection” etc., but most of it handed free money to the big boys.

    Then, when there was talk of bailing out everyday households, oh the wailing! The sobbing!

    What these crybabies don’t get is that the inflation is baked into the cake just like TARP and QE baked it in last time. Only this time it will be supercharged.

    The big boys know this. So they’re deploying all that free money to grab real estate at overheated prices because they know how much hotter it’s going to get. They also know that wages will continue to be crushed, so the average bear will no longer be able to hold onto their home no matter how low interest rates fall.

    $400k divided by 360 plus property taxes is the payment floor. Add a little interest and you’re squarely at the take-home pay of a $15/hour worker. So now you have one person in the household whose sole job it is to work 30 years to pay off a chipboard house. Huh? What??

    And don’t forget the minimum wage crybabies. They are very reliable in running for the bullhorns and sobbing loudly into them if someone even implies that $7.25 might be a little stingy.

    We get the government we deserve.

    • leanFIRE_Queen says:

      Become a remote worker, live in an RV, say goodbye to property taxes.

      That’s the optimal strategy against Fed and NIMBYs: make housing a discretionary item, say F*CK NO! to it and be the mobile economic entity cities and states will need to try to attract. Now my mobility becomes the Fed and NIMBYs’ problem as it’s deflationary and shits tax burden to the NIMBYs.

      • leanFIRE_Queen says:

        Sorry, shifts, not shits.

      • Zantetsu says:

        That would 100% be my plan *right now* if I did not have kids to shelter. It is still 100% my plan once they hit college age in 6 years.

        • leanfire_Queen says:

          > It is still 100% my plan once they hit college age in 6 years.

          We have the same exact timing!
          Meanwhile, I rent for $650/month and shifted to online schooling to gain even more mobility.

          No more “good district” tyranny for both of us. My son is so happy with the change!!!

      • VintageVNvet says:

        10-4, and now places in Caribbean offering free 2 year visa and other support for digital nomads, etc.
        I LOVE IT,,,
        BTW, there are many places in ”down home” fly over country where you can buy a lot with either no zoning, or zoning that allows MH, RVs, etc. for very little money and very little property taxes.
        One example is where we did that for 16 years, paid $200 per year for the first 15 years until we sold the place and the buyer reneged and the taxes went over $800 on $250K…

        • leanfire_Queen says:

          My son is getting land from his grandparents, so could park the RV there while being abroad.

          I’ve been working remotely for 3 years already. Never been to the Caribbean, but I would LOVE to keep on milking working remotely there!

          Do you have any other info regarding that free 2-year visa? My main target is the Mediterranean, mostly Italy, where I can also use my sailing certification.

      • MF says:

        leanFIRE_Queen:

        RVs are hotter than hot right now. Like many other trends, covid put the trend to full-time RV life into overdrive. RVs and the heavy duty trucks to pull them are flying off dealer lots. Used HD trucks are going for insane prices.

        If you’re thinking about it for yourself, tread carefully. Many house-bound people have an irrational hatred of RVers. All it takes is one obsessed neighbor to make your life miserable.

        It used to be that walmart and similar places would allow people to “boondock” overnight (stay in their RV without a hookup to utilities). Now, there are too many people doing it so they are clamping down. Until recently, it was a lifestyle choice and drew people who were very interested in keeping a low profile and would leave their parking spot better than they found it. Now there are a lot of families living in their RVs unwillingly. Their behaviors mirror their mood and they leave trash behind and stay for days or weeks in the same spot making it obvious they are squatting.

        The same goes for the national parks. People who live close to them are now patrolling and calling park rangers when they come across an RV they think has been parked too long.

        Check out RV park availability. See if you can find any decent quality parks in a temperate area with a vacancy before next summer.

        Milennials are outfitting vans. They make them look like service vehicles on the outside and stay (incognito) overnight in industrial parks. Most van inhabitants have daytime jobs. Check your social media for #vanlife. It’s a big thing right now.

        Boomers like to buy those off-road-capable Mercedes Sprinter vans (they have the money). They clog the national parks with them, imagining they need 4×4 for the occasional gravel road.

        It’s a huge trend that started around 7 years ago and exploded this year. I expect the backlash to be significant. People who pay $15-30k a year in property taxes hate van and RV denizens. They find creative ways to harass them. Cities and towns hate them too. I expect they’ll figure out ways to tax them.

        • leanfire_Queen says:

          > Many house-bound people have an irrational hatred of RVers. All it takes is one obsessed neighbor to make your life miserable.

          Don’t worry. Not planning on wasting my days on a sterile burb while having an RV :-)

          I’m in a great school district that’s offering online for the first time thanks to COVID, was able to test it. My son LOVES IT and I could buy the exact same system for just $1k. So much cheaper than wasting $ on property taxes!

          Picture me in a National Park while my kiddo is doing his MS online and I keep on working remotely as I’ve done during the last 3 years pretty successfully.

          I don’t need to allow NIMBYs have any opinion, they don’t matter anymore thanks to how I’ve been organizing my life.

        • leanfire_Queen says:

          > I expect the backlash to be significant. People who pay $15-30k a year in property taxes hate van and RV denizens.

          You have it backward. I am the one who doesn’t want these NIMBYs anywhere near me.

        • ru82 says:

          wow. I know Millennialcouples that have just outfitted vans to live in them. One is a childless couple and the other have a toddler. I did not know it was a craze right now.

      • Lynn says:

        Take my word for it. It get’s old fast.

  20. Gordon J McKay says:

    The logical conclusion to this progression is that individual family buyers or small buy to let guys get priced out of the market and eventually a handful of large corporations will end up owning the country’s housing stock. Money moving upwards again….

  21. Jdog says:

    Prior to the Great Depression, the vast majority of farmland was owned by private farmers. After the Great Depression most of the farmland was owned by corporations…

    • Tom Pfotzer says:

      Grapes of Wrath.

      Nobody told the story of economic dislocation better than Steinbeck. And here it is, happening yet again right before our eyes.

      If you’ve got a little time to spare, I suggest reading Steinbeck again. Don’t forget Cannery Row, either, but that’s just for great literature, not so much for the economics lessons.

  22. gorbachev says:

    Wipe out corners store-check
    Wipe out small farmers-check
    Wipe out good manf jobs-check
    Wipe out small landlords-to do list
    Wipe out home ownership-to do list

  23. Beardawg says:

    If this “scheme” continues – guessing 20-30 years when Corp owners of SFH will be 25%+/- of the market – what will happen to property tax rates? Big Boys ain’t gonna wanna pay…or….by then, lease-backs / renters will pay prop taxes as part of their rent?

    • leanFIRE_Queen says:

      I’m planning on living in an RV to avoid paying property taxes and state income taxes.

      If the goverment wanted me to lose mobility through home ownership, it would flood the market with the type of units I would be interested in: multi family housing, that are energy efficient, walkable areas, great internet, 2 bed/2 bath, not more than 1k square foot.

      An RV is the closest to the ideal unit that the market is delivering. The tax advantages a YUGE!

      • Harrold says:

        For your driver license, vehicle registration, voting, insurance, taxes, and other things you will need to have a physical address.

        • Petunia says:

          You can rent a box at a mail drop. Just like the big guys do in the tax havens. Pick one that doesn’t tax retirement income or any income.

        • Wolf Richter says:

          My understanding is that you can no longer get a driver’s license these days unless you have a physical address where you live — no mail box address — and you have to prove it by showing the lease, bills, homeowner documents, etc., and your name has to be on these documents, or your spouse’s name has to be.

          But you can make a deal with someone you know (a sibling or best friend or whatever), and “move in” for official purposes, and have all your official mail delivered to that address, including DL renewals, etc. I think that still works.

        • Anthony A. says:

          There are services that provide that address for RV’ers. They also forward any mail, pay bills, etc.

        • California Bob says:

          In California, at least, you REALLY want a ‘RealID.’ I believe it’s now required for domestic flights, if you don’t want to carry other supporting documents like a passport (it also makes it a lot easier to buy ammo ;). I got a RealID the first day the DMV opened after the covid lockdown; all told, it took about an hour because I’d had an appointment scheduled April 1 (the DMV shut down March 27). You’ll need not only address verification as mentioned, but a valid passport or birth certificate and Social Security card.

          Have to compliment the DMV, they had well-thought out safety procedures, with plenty of people on hand to direct the process. I was sweating bullets, as my license would expire in a couple weeks (there was supposedly an extension, but who knows if all LEOs were informed of it).

        • NARmageddon says:

          CaliforniaBob, NO: realID for flights has deadline OCT 2021, not this year.

          Harrold and Wolf: For CA DMV purposes, you need a “residence adress” , and you can have an optional different mailing address.

          I very much doubt anyone is required to prove their physical residence with a utility bill or such. Then roommates and even spouses could have a hard time getting a DL, not to mention homeless shelter residents. Voting ballots may have different rules. If you think I’m wrong, please link a reference.

          https://www.ca.gov/service/?item=change-home-address

      • OutsideTheBox says:

        So you expect to squat in Walmart’s or some such parking lot indefinitely ?

        Yeah…..expect that loophole to close.

        And RV services ? Sewage, water, battery recharging, propane refiling….RV parks charge some coin for that.

        Plus poor insulation makes squatting in an RV in the north country impractible in wintertime.

        All this hassle to save 2K of annual property tax ?

        • leanfire_Queen says:

          > All this hassle to save 2K of annual property tax ?

          It’s more than that and they will keep on increasing. Ditto with state income taxes which I will not be paying either. I will register the RV in South Dakota.

          What people here are forgetting to mention is that people who live in an RV and/or a boat are heros when it comes to fighting the increasing homelessness.

          Nothing helps more when it comes to housing supply not being able to catch up with demand… than saying “No, I don’t need to lose my mobility for a house that’s bigger than what I need”.

          It also helps the environment. It’s basically the right thing to do, with sizeable tax advantages.

        • OutsideTheBox says:

          Leanfire

          I have to say……will never understand anyone who makes a huge life decision based largely on tax implications.

        • leanfire_Queen says:

          > OutsideTheBox

          I don’t get why you picked that nickname when you are just promoting the status quo, at least when it comes to housing.

          For a ton of us, the burbs are freaking boring. If I can shift my tax burden to NIMBYs in burbs, for sure I’ll get that done. It’s fun!

        • OutsideTheBox says:

          leanfire

          Roger Miller wrote a song way back when called King of the Road. I believe that perfectly captures the mindset you espouse.

          So…..enjoy your hobo existence.

          Also…..your remote work via pirated Wifi ? If it can be done from any city street…..it can and will be done from Manilla, Hyderabad or countless other countries for mere pennies.

          So there’s that……

      • Paulo says:

        I’m in a rural area and people live in RVs in various places. There are places with pad rental and hookups, and I have also seen people who pick nice spots near a lake for a week or two, they disappear, then return all over again. They use sani stations for dumping their waste. All you need is a friend who collects your mail for you, or get a post box.

        With Covid the cops seem to be leaving people alone.

        • Paulo says:

          Leanfire,

          Should add about taxes.

          Just find an area with low property taxes. Where my house is…1/2 acre and 140 feet of riverfront is just $900/year.

          If you want roads to drive on, emergency services, and a functioning police force for protection you have to pay income taxes and sales tax. No free ride, even in an RV. :-)

        • OutsideTheBox says:

          Paulo

          All this “just live in an RV” nonsense “works” for a few because it is relatively rare compared to conventional living arrangements.

          Should these squatters ( that truly is what they are ) significantly increase in number…..the backlash will come.

          Nobody likes a free rider.

        • California Bob says:

          On one of our long road trips in an old British sports car we met a retired couple at Arches NP. They told us they went from NP to NP, serving as docents and campsite monitors/cleaners, with no entrance fees, for a few weeks, then moved on. IIRC, they did have a permanent home somewhere. It seemed like a good way to spend retirement.

        • Old School says:

          Same here. Still some areas that allow people to live in campers full time on a lot especially in vacation lake settings. County by county regulations I guess or if it’s really rural and no one complains it’s ok.

          My friend had an older 22 ft camper that was liveable for one. She paid $3,000 for it. When it’s rainy and cold it could keep you warm and dry.

        • Jdog says:

          When the American people, for whom the normal at one time was to own 160 acres of land, are forced by finances to become gypsies in their own country, the robber barons have truly assumed all power…. This is the result of the implementation of taxes by force. The only moral taxes, are voluntary taxes.

        • OutsideTheBox says:

          jdog

          You seems to have two opposing thoughts on your last post.

          Robbers barons and government taxes…..you know these are two diferent entities.

          The robber barons want us to become gypsies in our own country…..taxes, not so much.

          Freely given taxes ? Aha ! A libertarian !

          Name a viable/successful libertarian nation.

          Yeah…..I thought so.

    • Lisa_Hooker says:

      Renters have always paid the landlord’s property taxes. Where do you think landlords get the money? Working a second job?

  24. Seneca's cliff says:

    Real Estate Values and increasing rent for the benefit of absentee landlords (big boys) is dependent on the stable rule of law and respect toward property values. This has been the case in the USA since at least the 1930’s. But they may not be able to count on it in the future. The rise of mob rule in places like Portland and Minneapolis and the decreasing respect for federal authority in rural places like Montana may change this calculus a bit. If Blackrock were to buy up 30% of the houses in a place like Dillion Montana then attempt to evict the locals so they could crank up rental prices for WFH migrants from SF they might find that the Beaverhead County Sheriff and the local folks won’t go along with that scheme peacefully.

    • Lynn says:

      I think some of that is happening already.

      The other thing that is happening is some of the dispossessed are starting fires- both houses and wildfires. 46 people were arrested in California this year (as of Oct 2) for starting brush and/or wildfires. Those are only the people who were caught and arrested. A higher number were arrested for starting house or apt building fires.

      These are sick people- there is no other common denominator. But… a large percentage of them are dispossessed and hopeless.

      &… we have NO idea what percentage is already owned by corporations. Domestic or foreign. Their buying has NOT stopped since 2008.

  25. Trailer Trash says:

    In the Olden Days rural people frequently built their own houses. Yes many were poorly built and drafty, but there was NO MORTGAGE. The Amish communities near me still do this.

    I built my own small “camp” 40 years ago but it was destroyed by vandals after I moved away for a number of years. It wasn’t great but there was NO MORTGAGE. A dozen years ago I bought a used trailer house and poured a small concrete basement, again with no mortgage.

    My then-partner wanted me to mortgage my farm and buy a brandy-new double-wide for only a hundred thousand. That did not happen. Well I no longer have a partner but I have a place to live with no mortgage or landlord. That is worth more than all the gold in Fort Knox.

    I predict a resurgence in owner-built housing. Unfortunately many of them will be tar paper shacks built on marginal land with uncertain ownership. But even that is better than a tent on a Los Angeles sidewalk.

  26. Chris Fitzsimmons says:

    Wolf, I notice in the last week or so that U.S. treasury rates, yields are rising steadily except today a bigger jump especially in the 10, 20, 30 year maturities, 0.78%, 1.35%, 1.59%. They are still quite low still but it looks like the big banks maybe telling US Federal Reserve to back off a bit and let longer term rates rise some so they can borrow at 0.20% to 0.30% rates and go long.

    This is especially for longer term mortgage rates which will climb if these rates stay higher or go in a higher range over coming weeks.

    • Wolf Richter says:

      Yes, they’ve ticked up (a little), and as you said, are still very low. Looks like so far, the Fed is OK with it. And as you said, it gives banks a little more room.

      But mortgage rates could remain low, or go even lower if the spread between the average 30-year fixed rate and 10-year Treasury yields narrows further. That spread blew out in March and has since narrowed to 2.2 percentage points, but 2.2 pp is wider than in many periods of past years. So if the spread narrows to 1.8 pp, and the 10-year yield = 1%, you might have an average 30-year fixed mortgage rate of 2.8%.

  27. Stephen C says:

    When discussing the Fed’s war on Americans, lets not forget that it’s been happening for quite some time. Once upon a time a man could go to work, support a wife who stayed home and raised his children in a house they purchased and paid off in due time. This isn’t only the destruction of the middle class, it’s the demolition of the family and everything that comes with it, good or bad, however you happen to look at families. When the backlash comes, and it will come, will anyone be honestly surprised that it’s going to be visceral and brutal.

    • cb says:

      Good observation. Unfortunately, if that backlash takes place the visceral brutishness you describe may well be inflicted by the police state and military on the commoners.

      • OutsideTheBox says:

        cb

        You mean the police will somehow perform betterTHEN as opposed to their current bumbling and fumbling?

        • cb says:

          Yes. The police state only bumbles and fumbles according to the orders from above. If the order is given to impose Marshal Law and “right the crowd” you will see how efficient they can be.

        • OutsideTheBox says:

          So why haven’t those above ALREADY done so ?

          Looks like “they” lack fortitude.

    • Xabier says:

      That has certainly been a profound social and economic change for the worse.

      In 19th century England, the early economists and capitalists actually argued that it was much better to break up families and send their children off to work at a very tender age, as they were so poor and ignorant it could only do them good.

      Family life=sinful, but working to make another very wealthy= good.

      Similarly, the workhouses for the destitute separated man and wife, often at the end of a whole life of hard labour.

    • Old School says:

      I think some states are just getting uncompetitive and are going to continue to lose population. I saw NJ was spending $22,000 per student times 13 years is not a number some people are going to sign up for. I guess NYC is even higher.

  28. Jason Lee says:

    Hi Wolf,

    Long time reader (thank you for the awesome commentary). If bigger institutional players are moving into housing ala 2009, thoughts on how this impacts the overall housing bubble and asset inflation?

    • Wolf Richter says:

      We’ll have to see. These renters are moving from one place to another. So they vacate a unit, likely a rental apartment, and move into a house. And we have already seen surging vacancy rates and dropping/plunging rents in many expensive cities, and other cities too. So that’s likely to continue.

      In terms of the buy-to-sell (iBuyers), I’m not sure what this will do over the longer term. Short-term, it pushes up prices because these companies go out and buy houses and put them in inventory, so to speak, without having to sell them instantly. But over time, they have to sell them, that’s the other end of it, putting downward pressure on prices. They don’t necessarily have to make money to sell them either. They can (and do) sell them below cost, as long as markets go along with losing money, and that has been the case for now.

      Condos are coming on the market in large numbers in big cities, and prices are under pressure. Single-family houses for now are hot, but many houses are in forbearance with delinquent mortgages (7% of total), and many of these houses will likely have to be sold to pay off the mortgage when forbearance ends next year. These will be forced sales. And this is still coming at the market.

      I have never seen a housing market that is this screwed up.

      • MM says:

        First-hand account from L.A.:

        Millennial with a small family, work in tech, own a condo on the westside and was looking to purchase a SFH in a slightly less expensive part of town after saving up for several years. After 3 months, we’re calling it quits. There’s nothing for us.

        – Made 9 offers, total
        – All offers were at minimum 7% over list
        – In all but one, for the sales that have closed and been reported, we were outbid by no less than 60k
        – One home we bid on received, according to the listing agent, 47 offers; most others received double digits at least
        – Multiple homes we were interested in were still active but stopped accepting offers after about a week on the market; too many to consider, well above list
        – We saw a home listed at 998k sell for 1.325m, and it was an extremely poorly done flip job with obvious functional issues painted over or fixed incorrectly, per our agent

        It’s just an absolute feeding frenzy right now, and while I’m sure there are many others in a boat similar to ours, with some savings and a yearning for more space to ride out the pandemic, I just can’t believe most these offers are coming from actual families. So it doesn’t surprise me to see what Wolf’s reporting, re: credit-driven speculation.

        Meanwhile I’m tracking the inventory numbers via Redfin’s data portal and in L.A. metro, active listings are down around 17% from last year, yet home sales are actually up. So people are settling for crappier places and paying absurd premiums for them. On top of that, many offers are dispensing with the industry-standard appraisal contingency, because it seems likely that homes might not appraise for the amount of our offer. This was explained by our agent as “the difference between market price and market value” — what the hell does that even mean!? And if that’s a thing, when was the last time there _wasn’t_ a gulf between value and price of real estate in a market like this???

        Anyway, reading this and the comments, and other sites like it, and listening to economists like Michael Hudson, Steve Keen, James Galbraith and others, it really is an incredibly depressing picture for us — and I’m one of the lucky ones who actually owns a small place, has a somewhat high paying job, and enjoys the benefits of having won the genetic lottery with regard to race and gender.

        In my mind I can’t even fathom that members of the elite want such a future for their children, with such grotesque inequality, ever-shrinking hyper-competitive labor markets, and a cannibalistic capitalism that devours previously healthy companies via private equity takeovers or monopolistic brute force and shits out planet-threatening externalities in the form of hydrocarbon emissions, ocean-suffocating plastics as well as community-ravaging consolidation, outsourcing and wage arbitrage.

        It seems like our only hope is a populist crusader to call out this insanity and rally the majority against it, but, fittingly, all we could get so far was a two-bit grifter who plays one on TV. Big sigh.

  29. sunny129 says:

    @Wolf

    My 3 comments including ‘Kudos’ to Wolf have been removed, without any explanation! I my posting are wrong by their rationale or logic, I would very much to hear the ‘other side’ and the reason removing my comments. Thank you.

    • Wolf Richter says:

      sunny129,

      None of your comments have been “removed” recently. The kodos comment is there too. A comment might occasionally be in a thread replying to some comment that was removed, and all replies to that removed comment would then also disappear automatically.

      However, for some reason that I cannot figure out, your comments may end up in moderation, where they sit until I release them. Happens to other people too.

  30. makruger says:

    It goes without saying that this isn’t a very good time to invest in housing or apartment REIT’s. The charts over the past 20 years show a really impressive roller coaster ride. Some funds provided about 100x gains since 2009. However there were equally epic losses leading into 2009. If history repeats itself, taking some positions in the surviving REIT’s could be a really good long term investment.

    • Lynn says:

      One can only hope that large investing companies go bankrupt and we get OUR housing back.

  31. Lynn says:

    Thank you Wolf for looking in the corners and cracks and pulling out this data. This is what I thought was happening, but I could not find any data for it, nor could I find any stories on it.

    Seeing as *every* single news story has the line of “people moving from cities” as being the sole reason, yada yada, this has got to be really big. They are putting a great effort into hiding it.

    What is interesting now is that the fed seems to be panicking over no stimulus deal. I doubt they care if they care about the millions more homeless they are creating, but they probably do care if people can not pay the rent. No rent = no profit on buy-to-rent. No profit on buy-to-rent = less invested in many REITs.

    • Wolf Richter says:

      Lynn,

      If you can’t find the reports about it, you’re not looking in the right places. These things have been reported in bits and pieces for a while. Check the WSJ and Bloomberg, among others. Or go to the companies’ websites, where they promote this. This is not a secret but a booming industry that is promoting itself.

      • Lynn says:

        Thanks. I’ll try again when I have plenty of time.

        This is the first article I’ve seen where someone found the info and added it all up. At least, for 2020. Bits and pieces take time.

Comments are closed.