A deep dive into the debate about Wall Street's influence on rising house prices
I have some live footage of BlackRock outbidding a single mom and her five kids in the housing market.
Just kidding. But I do have a question for you: Are major institutions and hedge funds like BlackRock causing the increase in housing prices?
This is a hotly debated topic, with one side arguing that corporations are not the main reason for rising house prices, and the other side blaming corporations like BlackRock, Vanguard, and State Street.
Robert F. Kennedy Jr. has been very vocal about this issue, attributing the increase in housing prices to these corporations and predicting that they will own over 60% of all homes by 2030.
However, in a recent video, Graham Stephan argues that corporations only own a small percentage of houses and provides data to support his claim.
He also alleges that Fox News scrapped that particular episode as it lacked the sensationalism of corporate blame.
I'm conflicted. On one hand, I've seen data showing that institutions only own 1-2% of housing. On the other hand, I've seen countless stories of people being outbid by institutions.
So I decided to bring in an expert to help me understand this issue better. I'm Andre Jik, and today we're going to take a deep dive into whether or not BlackRock is really buying all the houses.
Before you form an opinion on this topic, I encourage you to watch the entire video. We're going to cover a lot of ground, and I want to make sure you have all the information before making up your mind.
Let's get started.
The idea that Wall Street is at least partially responsible for rising house prices is one of the few things that people on both sides of the political spectrum seem to agree on.
It's become a common belief that big institutions are buying up all the houses and pricing regular people out of the market.
In fact, it's become so pervasive that it's almost taken on a life of its own. For example, Larry Fink, CEO of BlackRock, has become something of a boogeyman in certain circles.
There are conspiracy theories about how BlackRock controls everything from global assets to world governments. It's all very dramatic.
But let's take a step back and look at what we actually know. First of all, BlackRock is an investment management company. They don't buy houses with their own money; they buy them with their clients' money.
And in order to be a client of BlackRock, you need to have a minimum of $250,000 to open an account. The more money you invest with them, the lower your fees will be.
Now, there were rumors going around that BlackRock was buying individual homes in the U.S., but they released a statement denying this claim. They did confirm that they are investing $120 billion in building houses for rental purposes.
So while it's true that BlackRock isn't buying individual homes directly from homeowners, there are other major institutions that do own and buy houses for investment purposes.
Let's take a look at who these players are:
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Blackstone: This is another major player in the real estate market. They're known for buying up distressed properties after the 2008 financial crisis and turning them into rental units.
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VanguardThis is one of the largest investment firms worldwide. They provide a diverse selection of mutual funds and ETFs that focus on real estate investment.
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State Street: This is another large investment company that offers real estate investment options to its clients.
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Fidelity: This company offers real estate investment options through its mutual funds and ETFs.
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JP Morgan Chase: This bank offers real estate investment options through its asset management division.
So while it may not be accurate to say that BlackRock is buying up all the houses, there are certainly other major players in the market who are doing so.
But how much impact do these institutions actually have on house prices? To help answer this question, I consulted with a real estate expert named Graham who has been following this issue closely.
Here's what he had to say:
"I think it's important to separate fact from fiction when it comes to Wall Street's impact on house prices. There's no doubt that low interest rates have driven up house prices across the board."
"But when it comes to individual homebuyers being outbid by hedge funds or institutional investors, I think it's been blown out of proportion."
"In reality, these major players own only about 1-2% of all homes. Thus, while they might be contributing to price surges in specific markets, they aren't the primary cause of the overall high house prices."
"I actually did an episode about this on Fox News recently where I presented this data. But they ended up canceling my segment because they said it wasn't as sensational as blaming Wall Street."
"It's frustrating because I think people deserve to hear the truth about what's really driving up house prices."
Graham makes some good points here. Low interest rates have definitely played a role in driving up house prices by making it cheaper for people to borrow money for mortgages.
At the same time, low inventory and high demand have also contributed to rising prices by creating competition among buyers for limited housing stock.
So while it's true that institutions only own a small percentage of homes overall, their impact may be more significant in certain markets where they are more active.
In addition, their presence in those markets may be contributing to higher prices by driving up competition with individual homebuyers who cannot afford to match the spending power of these large investors.
Personally, I think there may be more nuance to this issue than just looking at ownership percentages. For example, even if institutions only own 1-2% of homes overall, they may have more influence over market incentives for builders than their ownership percentage would suggest.
In other words, if builders see that there is strong demand from institutional investors for rental properties but less demand from individual homebuyers for starter homes, they may be more likely to build rental properties than starter homes.
This could lead to a shortage of starter homes and drive up prices for these types of properties, even if the institutions themselves are not directly responsible for the price increases.
To get a better sense of how much influence institutions have over housing market dynamics, let's take a closer look at who some of these major players are and how many homes they actually own:
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Pretium (parent company of Progress Residential): Pretium is one of the largest owners and operators of single-family rental properties in the U.S., with approximately 70,000 homes under management through its subsidiary Progress Residential.
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Invitation Homes (formerly owned by Blackstone): Invitation Homes was founded by Blackstone during the aftermath of the 2008 financial crisis as one of the first large-scale institutional investors in single-family rental properties. It currently owns approximately 80,000 homes across various U.S. markets.
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American Homes for Rent (founded by Wayne Hughes): American Homes 4 Rent was founded by self-storage billionaire Wayne Hughes and currently owns approximately 53,000 single-family rental properties across multiple U.S. states.
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Tricon Residential (Canada-based): Tricon Residential is based in Canada but has significant operations in the U.S., where it owns approximately 23,000 single-family rental properties through its Tricon American Homes subsidiary.
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Amherst: Amherst Holdings is an integrated real estate investment firm with various business lines including single-family rental property ownership through its Main Street Renewal subsidiary. It owns approximately 46,000 single-family rental properties across multiple U.S. markets
These five companies collectively own approximately 272k homes - which sounds like a lot - but keep in mind there are over 140 million residential units across America - so these companies collectively represent less than 1-2% ownership overall
So while these companies do represent some significant ownership statistics - they still represent less than 1-2% ownership overall
However - even though these companies collectively represent less than 1-2% ownership overall - their presence can still indirectly contribute to rising house prices
For example - if builders see strong demand from institutional investors for rental properties but less demand from individual homebuyers for starter homes - they may be more likely to build rental properties than starter homes
This could contribute to a shortage of starter homes and push up prices for those types of properties even if institutions themselves aren't directly responsible for those price increases
So while it may not be accurate to say that Wall Street is buying up all the houses - there are certainly some major players who are having an impact on housing market dynamics
And their presence can indirectly contribute to rising house prices by influencing builder incentives and creating competition with individual homebuyers
Graham raises some valid points about how low-interest rates have contributed to rising house prices by making it more affordable for people to borrow money for mortgages.
At the same time - low inventory and high demand have also contributed to rising prices by creating competition among buyers for limited housing stock
So while it's true that institutions only own a small percentage of homes overall - their impact may be more significant in certain markets where they are more active
Additionally, their participation in these markets might be pushing prices upward by generating competition with individual home buyers who are financially outmatched by these large investors.
Personally - I think there may be more nuance to this issue than just looking at ownership percentages
For example, even if institutions only own 1-2% of homes overall, they may exert more influence over market incentives for builders than their ownership percentage would indicate.
In other words - if builders see that there is strong demand from institutional investors for rental properties but less demand from individual homebuyers for starter homes - they may be more likely to build rental properties than starter homes
This could contribute to a shortage of starter homes and push up prices for those types of properties even if institutions themselves aren't directly responsible for those price increases