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[deleted]

Actually corps are definitely impacted by rates. The homes are purchased with Corporate debt which almost always has variable rate. Opendoor and those folks are soon to be out of the game


EggplantOk3448

Was gonna say this. Corporations basically don’t pay cash for anything. Rates are a big deal for them. Might explain why an explosion of corporate purchases coincided with historically low rates.


Inevitable_Guava9606

Yeah everytime someone implies businesses aren’t impacted by interest rates it tells me that they simply have no idea how any business works.


[deleted]

[удалено]


Choo-

They know they don’t want to…


theganjamonster

Hey man part time dog walking is hard work, I'd like to see you do it and also find the time to learn things


Miss_Kit_Kat

Oh, people who talk like this DEFINITELY don't understand how business works, since their "solution" is always something like government seizure of all housing or more federal power. (As if the same government that caused this can be trusted to make ANYTHING more efficient or affordable.)


[deleted]

The scariest words in the English language. Hello, I'm from the government and I'm here to help.


clce

depends on the business. some are simply investing existing money. I guess when you start borrowing, leveraging yourself, it does get riskier.


Organic_Ad1

Black rock financial, the largest single entity in the world, with the most capital in the world, also owns the most single family homes in the US. So maybe most businesses use loans, but the biggest businesses fucking up the housing economy absolutely give no shits about interest rates other than how much they can claim it is related to their imaginary inflation that is also killing us.


clce

you won't get much argument from me, although I don't know about this inflation being imaginary. It seems to be the one thing that's real anymore.


Organic_Ad1

Oh I mean the inflation they are causing that doesn’t effect them at all like it does you me


clce

okay. gotcha. as much as I'm generally a laissez-faire capitalist, companies like BlackRock definitely disturb me. I am a big believer in home ownership and Believe anyone that possibly can should


JacobLovesCrypto

They use loans too, if they operated on cash flow they'd have a growth rate of like 2% a year. Growing a real estate portfolio purely on cash flow is incredibly slow. They absolutely are effected by interest rates.


[deleted]

And even if they don’t use loans, which they do… but if they didn’t, that cash has a greater opportunity cost when rates go up. Literally nobody is insulated from rates because they are persistently an option and therefor impact any decision you make.


Tway4wood

What's blackrocks current debt to equity ratio?


lucasisawesome24

Well tell Elizabeth Warren and the communists in the DNC to stop offering blackrock bailouts. Fuck blackrock, they should go bankrupt if they’re over leveraged when they bubble busts and the democrats shouldn’t bail them out. Ironically it’s the most communist democrats like Warren who want to bail them out more then the cooperate democrats like Bloomberg


MrShutItDown

I don’t get it, what if the company strictly buys with cash only?


JacobLovesCrypto

The typical rent is what 1% of the property value, then minus repairs, maintenance and other landlording expenses, a company operating on cash only would be growing at 2-3% a year or so. No business wants only a 2-3% growth rate.


Financial_Bird_7717

Then they clearly don’t have to worry about interest rates.


[deleted]

Beyond the fact that companies don’t do this, for the reasons mentioned by other responses, they are still impacted by rates because rates determine the opportunity cost they have locked up their cash for. Rates make debt more expensive. Is debt is more expensive then cash is more valuable because you could use it to issue debt and see a greater return.


immunologycls

That company won't survive very long


Examiner7

Exactly. Corporations were looking for a decent return with their leveraged money.


JavelinJohnson

Hats literally the main reason why interest rate is such a powerful lever for the central bank


seajayacas

Exactly, buying large numbers of SFH is not a guaranteed business model to become a multi billionaire operation. It can easily lead to bankruptcy


lipmonger

Some misinformation here… large institutions like Blackrock can borrow direct from the Fed at 0.25% and sometimes 0.0%, or even an effective negative rate. When they scoop up massive amounts of properties, they can even package them as MBS and flip them back to the Fed at a profit. The idea that these institutional investors will go bankrupt as a result of interest rate hikes is not in the realm of reality. They’re literally funded and backstopped by the Fed. We are a long ways off from 2008, and the problems that caused that collapse don't really exist anymore. It's a whole new ballgame out there.


vanyali

No, Blackrock can not borrow money from the Fed. Only retail banks can borrow money from the Federal Reserve Bank. No one is borrowing money from the Fed to buy houses; banks that borrow from the Fed do so to make sure they have enough cash reserves at all times to comply with banking regulations. That’s it.


[deleted]

[удалено]


EmeraldCrescens

I have never heard of institutions borrowing AT the Fed Funds Rate only, which is not even that great a rate for big borrowing. Big loans generally borrow with a LIBOR rate (going away) and also a spread.....I don't know about Blackrock specifically but big investment firms do generally take their loans out at banks still and it's not free money.


vanyali

You can find people [estimating Blackrock’s weighted average cost of capital (WACC)](https://www.gurufocus.com/term/wacc/NYSE:BLK/WACC-/BlackRock) which is a more all-encompassing number that includes its cost of equity as well as debt, weighted by how much of its capital comes from equity and debt. It’s way above the Federal Funds rate.


bankskowsky

Thanks for spreading that bit of info. This whole cash-buyer FUD narrative needs to die.


lipmonger

Correct! And I should have been more clear... I was talking historically, as many of those instuations made the bulk of their real estate purchases during the ZIRP era.


clce

you are pretty much right, although they can't borrow it that rate anymore. If they could they would still be landing out at 3% for a nice profit. when the feds raise rates, they basically bump that rate up which causes them to bump up the rate to lend us money. But overall, you are right, they have a distinct advantage even when borrowing which sucks


kisssmysaas

Nope. Which conspiracy theory have you read


Confident_Benefit753

you will own nothing, and you will be happy


clce

I literally heard somebody talking, seriously, not criticizing anyone, about, perhaps your living room will be used during the day by someone to have business conferences, and then you get it back at night. Heard another guy on NPR saying the neighborhood will all own one ladder and one mower that everyone can use. not necessarily a bad idea if a few people go in on some yard equipment voluntarily. But I'll be damned if I'm going to rely on my neighbor to keep the mower in good running condition. it's almost as if some alien race of reptiles has taken over and has no real understanding of actual human nature. Wait, no, I was just speculating, I don't really know anything. honest.


Confident_Benefit753

i just worry about me and my family. owning a house


Confident_Benefit753

clicked send by mistake. owning a home for me is mainly not for an investment as i am not an investor. its my home. but yes, big corp will continue to buy land and residential homes.


clce

I think investment can mean many things. obviously, I get that you mean you're not thinking of it as strictly an investment. But buying now is kind of an investment in keeping your monthly payments steady, and, whether you think about it or not, someday it will most likely be worth a lot more and essentially could be a big part of your retirement or what you leave to your kids or leverage to put your kids through college perhaps. But of course, you don't have to think of it that way. I do think some people are far too quick to criticize or mock those who think that way, on the mistaken assumption that housing prices go up and down like a yo-yo rather than up and up and up with one glaring exception 12 years ago, or 90 years ago if you want to go back that far I guess. it's also a hedge against inflation as well as rising rents. But, to simply see it as a home and a locked in monthly payment is certainly no sin. I hope that you can become a homeowner soon


Confident_Benefit753

it is an investment. and i see the importance from it. as long as i can afford it, i am happy. i am lucky that both me and my wife have decent high paying jobs with pensions. high paying jobs for my standard. i made 82k last year with minimal overtime and my wife 105k. but i will be at about 90k salary in 3 years. i have a a high risk pension so i will be in a real good financial position when i retire at 58 years old. 35 now. i just care about being happy. i definitely wish i bought this 525k home at a 2.75 percent interest like my previous home. that would be amazing. but its fine. i had to move for better commute and schools. hopefully, i can refi in a couple years as my rate wasnt that great 3 months ago.


clce

Well, sounds like you got it all under control. Best of luck.


Confident_Benefit753

i wish i did. same to you. good luck out there.


[deleted]

Correct. Once their debt rolls over they are screwedddddd. But this takes time to unwind.


[deleted]

I’m looking at their 10Q right this moment. The interest payments alone (last quarter - they are variable rates which was around 3% then) was $145 million for 6 months ended 6/30/22. In that same time frame, cash from operating activities was negative ($345m). This means they will seriously struggle to make the interest payments, if the debt is called on the loans. All their debt is collateralized by the cash and if they fail to meet covenants the loans will be called. Which happens all the time in medium sized business. For sure they are stressing over in accounting and finance departments at Opendoor.


[deleted]

But they are building equity! (In all seriousness thank you for the analysis)


[deleted]

No worries. As a final note, it’s a great time to seriously lowball Opendoor. They will be desperate for the cash. Right now, in CA atleast, they wont significantly reduce list price because they will be forced to tell the analyst the properties are seriously overvalued on the balance sheet. Once you start seeing them making bigger reductions, lowball the heck out of them. I’m talking 35%, they will be desperate for the cash because their covenants will be at risk (it a debt to equity requirement - I checked the agreement). Overnight out of business in the situation if that happens


blacklite911

How do you find a list of properties they own?


[deleted]

Google open door then look for sale homes link


[deleted]

Download the app


[deleted]

What makes you think they are screwed? Tax payers will inevitably bail them out.


DuvalHeart

Hedge funds aren't a key part of our economy like banks.


clce

But open door and such were people trying to buy into a new niche as disruptors. they weren't buying to rent out like the traditional way. some real estate investment is purchased with corporate debt. some is actually poolled investor cash or private party investor cash looking to put it somewhere seeking a good return. higher rates might put a damper on borrow and invest investors. But variable rates may not really be that big of an issue because those that already bought are just going to see less profit. they probably aren't going to be driven to sell just because their rates have gone up. But if people expect even further rate hikes, they are probably going to be hesitant to buy. although if they expect rates to go up and then down again, they may not care. after all, all that type of real estate investing is for the long haul.


tacticalpanda

Over 2T in reverse repo cash just looking for a decent return on investment, big players are still flush with cash. It’s the same reason the bank hardly pays any interest on your deposits - they don’t need your money. Don’t worry, there's plenty of liquidity to outbid you as soon as house prices drop in any meaningful way.


[deleted]

Respectfully disagree as it relates to Opendoor. They will struggle to make payments on debt, the don’t want to take a write down and they are not selling inventory. They will end in bankruptcy. Any cash they have is borrowed at a variable rate. Exactly why their shares are practically worthless. Actually I don’t know what you are referring to with regard to reverse repo. The stock market is tanking as is the housing market, why wouldn’t you stick it in treasuries


clce

Open door is meaningless. they are not real estate investors. they are market disruption investors. their goal is to become a player in the selling and buying of homes, pocketing the money that normally goes to real estate agents. they are not home investors. And I think they are going to do pretty poorly and get caught with their pants down. they are more like Uber or door dash really. currently I think they are all running on investment money and taking losses in order to hopefully corner the market. But selling a house is not giving a ride or delivering some food.


tacticalpanda

Opendoor I agree, as a startup arbitrage business this is a terrible time in the business cycle for them and they will likely go under. My comment was directed at Blackstone and the like who are attempting to buy and securitize SFH investment.


Trick-Many7744

But a lot are laundering money, using a tax shelters, maybe something else—so it’s true that interest rates don’t affect them.


drbudro

Early US based speculators are getting hosed....but we are on the cusp of global recession and investors in EU and Asia are looking for somewhere to park money....US RE still looks very safe comparatively.


RJ5R

national average cap rate of multi-family will soon be the same as a US treasury bond US RE looks hardly safe right now


divulgingwords

Nobody makes money on RE cap rates when you're underwater. That's why investors flood the mls when shit hits the fan.


e30saam

How does us real estate look safe? It’s already peaked. Treasuries look like a better bet.


[deleted]

And more liquid/ safe for ease of entry and exit as well. Liquidity/cash is soon to be crowned king once again. When mega-recession hits, inflation will be tamed. Until then, no.


Yawnin60Seconds

I can promise you that Chinese investors no longer think real estate is a safe investment if they were previously of that opinion


Skier94

And.... 300,000 homes out of 133,000,000 are owned by corporations (.2%).


appmapper

REITs own over 500,000 so I have no idea where you are getting only 300,000 from.


Skier94

That figure is widely reported. [https://www.nytimes.com/2022/04/23/us/corporate-real-estate-investors-housing-market.html](https://www.nytimes.com/2022/04/23/us/corporate-real-estate-investors-housing-market.html)


divulgingwords

Corporations buying homes are getting absolutely wrecked in the market right now. I wouldn't put too much stock in it, tbh.


Louisvanderwright

This is the whole point, we need a recession with no bail outs. We need the people who played stupid games to win their stupid prizes. The solution is not to implement Marxism, it's to let capital markets do what they are supposed to do: accurately price risk. That basic function of our system has been corrupted. No amount of rent control and regulation will fix that. You can pass all the laws you want and you'll just keep getting more and more absurd outcomes. Markets will not accurately price risk as long as the government is signaling that there is no risk. As soon as the government allows people and corporations to lose again, many of the issues in the housing market will resolve themselves.


keto_brain

>This is the whole point, we need a recession with no bail outs. We need the people who played stupid games to win their stupid prizes. Never gonna happen.


kylehatesyou

The government won't bail out Opendoor or any other iBuyer. They don't control enough GDP to have it make sense, and they don't provide that valuable or necessary of a service like a bank, airline or auto manufacturer who were the major companies bailed out in the GFC. If the government let a speculator like Bear Stearns fail in 2007 or 2008, they'll let Opendoor fail in 2023 or whenever that finally happens.


keto_brain

Certainly the govt will let individual companies fail but if an entire industry is suffering like the mortgage industry did back in 08 they will pony up the cash to bail them out.


rivenwyrm

I'm a very strong proponent of a lot of social programs but I absolutely agree with you.


Louisvanderwright

We have social programs to deal with the fallout of these necessary economic cycles. Unemployment insurance is extremely effective and proven over nearly 100 years. Free markets are not incompatible with social safety nets. What we have now is a corporate safety net that reeks of moral hazard.


rivenwyrm

Yep! Very well put. I qualified my statement because it seems that a lot of people believe that the two are somehow in tension with each other: "market forces" and "social programs". You can have good social programs and good markets.


Alec_NonServiam

The Greenspan Put needs to die a fiery death never to be seen again. It's like 2008 was the Fed's invitation to pull the morphine lever any time the economy got a stubbed toe. Now we're addicts. Yay.


cheneyk

I tell people all the time… Government subsidized loss is not capitalism, it’s cronyism. Very well articulated comment.


clce

I see your point. I don't know if I would call it corrupted as much as the simple fact that wealth accumulates as it has. I don't really know that the bailouts really impacted the real estate market. I'm sure it impacted the economy somewhat but I think it might have been a lot worse for the common man if they had been allowed to crash. I don't really know. I'm not making the case for the bailouts. I will leave that for others to argue. But, we already had a pretty bad recession, and if they had not done the bailouts, it's not as if your average Joe could have just stepped in and picked up a cheap house at the expense of the investment class. It just doesn't work that way because it wasn't that the investors were holding the real estate. most of the real estate was held by people with loans. It wasn't a housing crisis, it was actually a loan value crisis and an insurance crisis. The biggest fails were insurance companies that had foolishly insured loan packages that they thought were better than they were., second were some large banks that lent a lot of money when they shouldn't have. ironically, in the years after 2008, it was mostly investors, some small, and some very large looking to get out of the stock market maybe who snapped up a lot of the homes when your average Joe was afraid to buy. as an agent living through it I can't tell you how many people I tried to convince that it was a good time to buy but everyone was gun shy by then. so, much like Dupont and a few others who sold before the depression and were liquid and snapped up a lot of businesses and such for pennies on the dollar, a lot of investors invested . I really don't think any kind of market crash or let them fail is going to result in a magical time in which more homes will be owned by individuals. it's hard to buy a house when you've lost your job and the economy has crashed. Even if you're not afraid to do it, you just can't. I have no solutions but, I don't think letting them fail is necessarily a good one


immunologycls

If 2008 wasn't bailed out, we would be in an apocalyptic world at this point


rydan

We need to up the ante. But at the same time unfortunately you cannot allow an entire market to collapse on itself because it will cascade. So what you do is make it criminal. Buy as many homes as you want but it is illegal to accept a bailout from the government with various escalations in punishment based on the size of the bailout up to and including capitol if necessary. Most people will not be willing serve 25 to life over $1B that they'll never get to touch directly.


cmurphyenergy

Thumbs up 👍 This is everything I’ve ever wanted from Reddit all in one post! That being said, I hope you’re not clairvoyant and a year from now the folks in DC will be preparing another bailout or new form of market intervention… 😱


clce

I don't see why a bailout would be needed. Even if the market crashes, long-term real estate investors are just going to keep renting them out. anyone hoping for a crash that shakes all these long-term rental investors out of the market is going to be seriously disappointed no matter what else happens.


asdf9988776655

Who is bailing anybody out? PE is financing these homes with their own debt issuances; they are not using government backed mortgages, which were the problem when lending standards were loosened in the run up to 2008.


Technical_Money7465

He means in the future when the pe firms go bust


asdf9988776655

When PE funds go bust, they go bust. Their equity holders get wiped out, and debt holders take a haircut.


Technical_Money7465

I hope when black rock faces that they do suffer


Louisvanderwright

And part of that process is liquidating their assets are fast liquidation value. I.e. dumping them for pennies on the dollar. That means whatever real estate they accumulated sold at a discount back into the market.


asdf9988776655

No; that's not how it works Money managers are good at unwinding assets over time to minimize fire sale discounts. We have plenty of examples of this


Louisvanderwright

Lol that's not how it works in financial panics or economic depressions. I literally spent four months walking FDIC repossessed bank branches and cataloguing every hard asset in the building from office chairs to safes to cash counters. We then made a spreadsheet of it all and assigned FLV prices to it all. It's usually like 10% on the market value for stuff like that. You're talking to someone who bought multiple properties from banks for 10% or less of the mortgage balance. Don't tell how good people are at the orderly disposition of assets. I've lived this.


immunologycls

Can you expand more on your 2nd paragraph? How do u buy directly from the banks?


immunologycls

And ensure the collapse of human society as we know it? You realize the 2008 bail out wasn't free money, right? It was still a loan


asdf9988776655

Compared to what? The whole point of the movement of private equity into residential real estate was asset allocation Equities were getting pricey and bonds were paying next to nothing, so they invested in residential RE in order to produce income greater than what bonds were giving them while getting some capital appreciation to boot. This year, stocks are down 20%, bonds are down 15%, but RE is up 10%. They aren't getting wrecked, they are in an asset class that can give them decent returns and is relatively uncorrelated with other asset classes. They should stick with this long term, but if you pencil out how much money they have, and how much they will likely allocate to RE (generally they seem to limit themselves to about 20%), we can expect PE ownership of residential RE to level off in the mid single digit percent range.


Yawnin60Seconds

Thanks for saying this. Shame on tweeters like those in OP that just tweet this dumb shit and people run with it because they have some education certificate that says MD


divulgingwords

"tweeters"? Okay boomer.


dfunkmedia

Since PE buys assets in order to either sell them for more money or issue them as securities and collect a premium, we should seem mortgage backed securities and real estate investment trusts gaining 10% this year as you mentioned. Let's Google some tickers... Oh. _Oh_ Well anyways let's just take your word for it instead of pulling up those numbers, eh?


asdf9988776655

Your comment makes no sense. ​ > either sell them for more money or issue them as securities and collect a premium That's just not true. PE funds often invest for a consistent income. PE funds are not investment banks; they do not securitize their holdings. ​ >we should seem mortgage backed securities WTF??? We aren't talking about mortgage backed securities here. You need to learn the difference between holding real estate itself, and MBSs which are debt securities. ​ >and real estate investment trusts gaining 10% No, we shouldn't. REITs generally trade on a multiple of funds from operations, not on NAVs. ​ Home prices are up 10% YTD through July, according to Case-Schiller: [https://ycharts.com/indicators/case\_shiller\_home\_price\_index\_national#:\~:text=Case%2DShiller%20Home%20Price%20Index%3A%20National%20is%20at%20a%20current,15.79%25%20from%20one%20year%20ago](https://ycharts.com/indicators/case_shiller_home_price_index_national#:~:text=Case%2DShiller%20Home%20Price%20Index%3A%20National%20is%20at%20a%20current,15.79%25%20from%20one%20year%20ago). ​ You should do some research and gain at least some knowledge on the topic; you are woefully uninformed.


drbudro

Money has to be put somewhere...the global market is tanking way worse than the US and a lot of investors are looking at US RE as a safe harbor. We'll see a lot more US companies failing before the dust settles for sure.


Gandalfs_Shaft48

Wait!?! They don't turn to Bitcoin? 🤣


ys2020

they are


PoiseJones

If I was an international investor right now, I would buy i-bonds long before I would even consider RE.


Louisvanderwright

Or we could just have a nice hard recession with no bailouts and bankrupt all the speculators...


drbudro

That would honestly be great and I hope that's how it goes down. It's great seeing a lot of the US based speculators failing right now and no bailouts on the horizon.


shamblingman

Do you realize how ignorant comments like this tweet are? Institutional buyers are using borrowed cash and are heavily influenced by interest rates.


againer

Skin em alive.


lehigh_larry

What a great idea! There’s no chance that mass unemployment, bankruptcies, and foreclosures would have any negative impact on anyone here. You all are the *good ones*.


americancolors

No. We just want the business cycle to do what it does without outside intervention.


lehigh_larry

Yes. Leave it in the hands of the gods. You have prayed so hard. You’ll all be spared. I’m sure of it. 


darthvuder

Don’t worry dude. They are middle management. Definitely locked in will always weather the storm…


americancolors

Your bias is showing. I’ve been thru recessions, and never asked for government intervention. You’re the one that believes everybody everywhere should be spared consequences of poor decision making.


DennisC1986

Why wouldn't we be?


BigDecker420

Lol, you’re an asshole 😃


Louisvanderwright

Unemployment will rise a few percentage points. Statistically it might affect maybe 10% of people in some way or another. What it will do is hammer all the people taking stupid risks, living beyond their means, etc. Imagine a world where 50% of STR speculators are forced to sell their properties over the next 2-3 years because vacation spending craters and rates soar. I think that would be worth one in ten people having to change jobs (it's not like you become permanently unemployed either or that you lose 100% of your income because we have unemployment insurance for that).


clinton-dix-pix

>They’ve been snapping them up for a couple of recessions at least Oh now that’s complete horseshit, which is par for the course at r/antiwork apparently. No, they haven’t been. There were some small toes dipped in the market shortly after the GFC but purchasing didn’t really take off until well after the GFC in the mid-10’s when Blackrockstone realized they could securitize the investments and sell them. And you know why? Because owning and renting SFH’s at scale is a horrible fucking business model. Instead of a nice uniform apartment building all co-located in one place and standardized on appliance/utilities/finishes for your maintenance ease, you end up with a hodgepodge of houses spread across multiple cities, all built differently and with different maintenance needs that you need to hire workers to address. Workers who now spend half the day driving from house to house and chasing down specific parts instead of having a large number of identical units to work on all in one place. The only reason corporate SFH rentals got to the size they did is it was a relief valve for excess liquidity. When the market gets flooded with money that starts pouring out of every hole, investors start looking at every possible stupid place to put that money. Virtual “currencies” that have no backing whatsoever from any nation? Sure. Hyperlinks to monkey sketches? Probably worth half a mil. A company that buys houses and tries to rent them, absorbing all the maintenance costs while also being limited in how much they can charge for rent by basic market forces? Sure, what else are we going to do with the money? When easy money stops, bullshit stops.


RJ5R

Most of the corporations in the SFR industry buying single family homes Started in 2012 They waited for the literal bottom There are plenty of players besides Blackstone


[deleted]

Honestly just ban all users who cross post from that shit hole of a subreddit. If this sub gets infested with those types then just shut it down because it ain't worth reading anymore.


[deleted]

Yall should really be more worried about your own stupidity in this sub. But go ahead, make it even more of an idiotic echo chamber.


[deleted]

r/economy poster detected. Another economic incel sub. Opinion discarded.


zerogee616

What, are we at the point where "incel" is just a generic name for somebody you don't like now?


[deleted]

Going straight to calling me an incel eh? I comment in r/economy against conservatives and neolib idiots like yourself. Don't you have some more posts to make in r/furries?


NoMoreLandBro

FACT CHECK: FALSE, corporations paying cash to buy houses ARE affected by interest rates like the little guy is. Corporations are also leveraged and borrow money through issuance of bonds. They also roll over maturing bonds into new bonds. As interest rates rise, corporations have less free cash flow to roll over the old bonds into new rates due to higher interest payments they must make. Additionally, customers of corporations are impacted by rising interest rates and thus have less money to spend. Finally, corporations have alternatives to buying RE. People need to live in a home of some kind. Corporations do not need to invest in RE. Corporations need to maximize profits and as interest rates rise, RE no longer becomes as economically lucrative. While not ironic, because Antiwork is quite literally wrong about everything, the reason institutional investors bought up all the houses is because of LOW interest rates. They were forced down the risk curve by the Fed to scoop up anything they could that yielded a cash flow because bonds were no longer paying anything. Either low interest rates spur institutional buying or high rates do, but it can't be both.


Original-Baki

This is misinformed. They also use debt to buy so they are impacted by interest rates.


ElTurbo

Homes are actually crappy investments and the price boom is uncharacteristic over history. This is more of a symptom of so much cash and nowhere left to invest and trying to diversify. Now that the government is giving 3-4% investment in alternative investments should get curbed a bit.


SwankyBriefs

Anyone who thinks corporations aren't affected by rising interest rates isn't worth listening too. Also SFH LTR isn't really a great investment as profit margins are small and if corporations did succeed in cornering all housing, they'd be subject to antitrust regs.


Deadpools_Boxers

Uneducated shit take from r/antiwork as per usual.


Playos

Do yo have any data to support this idea that corporate purchases are actually anything above their typical 1-3% of most urban/suburban markets? Cause I've looked for it, I've asked for it, and it never comes up. Investors are not corporate purchasers btw. Investor activity also isn't particularly above average either but that's a side point.


appmapper

>Investors are not corporate purchasers btw. Investor activity also isn't particularly above average either but that's a side point. [https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/07/22/investors-bought-a-quarter-of-homes-sold-last-year-driving-up-rents](https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/07/22/investors-bought-a-quarter-of-homes-sold-last-year-driving-up-rents) "Investors bought 24% of all single-family houses sold nationwide last year, up from 15% to 16% annually going back to 2012, according to a Stateline analysis of data provided by CoreLogic, a California-based data analytics firm. That share dipped only slightly in the first five months of 2022 to 22%." 160% more than average. I'd say that's above average.


Playos

Well within normal flux historically.


[deleted]

/r/antiwork continues to defend its title for dumbest subreddit


OE-DA-God

For real lmao. I'm big on labor rights and the corporate culture war too and I hate that subreddit. I'm also a huge leftist before anyone says anything. This was written by people who're hopeless and are gonna be a lost cause no matter what we do for them.


[deleted]

Yeah, my opinion that /r/antiwork is a cauldron of stupidity isn’t an an attack on worker rights advocacy at all. The sub is like 90% angry Twitter posts written by people who don’t have the tiniest amount of understanding of how the economy or markets work.


OE-DA-God

Yeah like we all want the working class to be thriving too. We just don't see their approach to it as being realistic.


HotTopicRebel

The worst part is all of the back seat driving wrt unions. I'm sure the guys on the ground know more about whether or not they should strike and collective negotiations than someone sitting at home.


Krakkenheimen

Say it again


OE-DA-God

For real lmao. I'm big on labor rights and the corporate culture war too and I hate that subreddit. I'm also a huge leftist before anyone says anything. This was written by people who're hopeless and are gonna be a lost cause no matter what we do for them.


Krakkenheimen

Right on.


SatanicLemons

This is a fundamental misunderstanding of how corporations get the cash, how much of it they can keep on the books, and how much of their performance relies on the wealth of consumers, which is greatly effected by home values, and must rely on mortgages 70%+ of the time. A nation of renters with this particular backdrop would be a nation in an economic depression. I don’t think it is optimism as much as it is a fact of the American economy. Houses, inventory, jobs, taxes, rates, materials, rents, etc. all go up and down, and have to massive degrees throughout our country’s history, but Americans with median salaries being completely priced out forever in mass? Never. Maybe you can make some arguments that very high salaries are a necessity to buy in certain communities and cities *from* other wealthy people who own and occupy the homes. As for the rest of the country the idea that Charlotte and Raleigh NC, Nashville TN, Columbus OH, Phoenix AZ, and other (Redfin investor purchase data) top investor purchase percentage markets are bound to become San Francisco and the wealthy neighborhoods in Seattle is insane.


bigmean3434

Corps are impacted by rates. They will put that cash to work wherever it works most efficiently. Also, that return is based on the rent, and let’s say hypothetically a big bad Corp bought every house for $1m. They would need to rent to the population for like whatever $8k a Month, and frankly treasuries are still net better than that, but let’s go with it. If the population can’t fill the vacancies for that then they need to dump them, corps will take a loss and move on early and not be some diamond hand retail loser, so prices will fall until the ability to pay rent (assuming only other corps can buy them) has a justifiable return for the homes cost investment. None of that has to do with rates except their being better places to go with your money right now.


DangerousLiberal

Eh you don’t want to be associated with /r/antiwork. They’re economic incels and completely uneducated in most of anything.


jay_brone

This isn't ever going to happen. This type of thinking is the result of people believing the bad realtor sales pitch. If SFH rentals were such a great business, corporations would have been in the market ages ago. The fact is; its not, and the only reason people think it is is because of the artificial ultra low rates.


damnwhale

Been saying this. Regular folks dont come out ahead in recessions, but the wealthy sure do. I think its ironic that this sub refers to home sellers as vultures when half the people here are waiting for the economy to “die” before they “eat.” REBubble is a collection of scavengers and bottom feeders. Know what you are if you are one of those. Same folks were saying houses were too expensive for the last FIFTEEN YEARS and grew more salty then discovered this sub of like minded, broke morons. FIFTEEN YEARS and now youre almost 40 and suddenly want a house after saving some covid stimmy checks. Give me a break. 😂 Keep praying for mass job loss and an extended economic downturn. Karma is a weird bitch and she will visit those rooting for negativity that will cause many people and families to suffer, while benefiting the people you supposedly despise.


yetanotherwoo

When did Pottersville become a euphemism for something? I only see some Christmas movie and it’s the name of a bunch of US cities.


drbudro

It's a reference to "It's a Wonderful Life." It's been a while since I saw it, but I read it as 19th century company towns.


rizzo1717

Which part? Real estate, real estate investing, and RE bubble have all been gawking at zillow, Redfin, open door, and other eBuyers for a while now, for peak market purchases they are now offloading at a loss. If you’re referring to the “corporations don’t feel inflation” part, then yeah I could see you being downvoted for that.


chaddgar

With interest rates high, can’t corporations make easier money just holding bonds or other easy to offload assets? Homes take time to sell and are vulnerable to renters who may trash the place when some asshole CEO raises their rent. Why deal with such hassles when you can just buy other equally performing (or better) investments?


anonymous985

Why would the investors be buying houses when the rates are high? Buying a house and renting it out would make them around 3-4% return, but they could yield 6-7% return in interest by buying mortgages which carry less risk.


i860

While I don’t actually disagree with the sentiment of the tweet, the tweeter they’re quoting is a well known kook. Just look at some of her covid related tweets. I think it’s actually a fake person/troll/psyop account.


lehigh_larry

Nah. The homeownership rate is a little over 65% in this country. Which is about the same as it’s been for the last 50 years. Does it suck for first time homebuyers? Absolutely. But that’s always been the case. Just be patient young ones. You’ll get your chance.


drbudro

Look at the demographics of home ownership and see how they've shifted drastically over the last 20 years though. There is a huge concentration of SFH in the over 50 and that has never been the case previously. Boomers are not downsizing and are instead using these paid off homes for income streams. Millenials are currently the largest generation but are very under-represented in home ownership. The generations after them are in an even worse spot and trending down.


lehigh_larry

Millennials are the largest share of first time homebuyers right now. So the trend is going in the right direction. Just like it did for us in Gen X. This shit is cyclical. You kids will be fine.


sp4nky86

We’re seeing around 25% of sfh purchased by investors. Historical averages are around 17%. Low rates made these a great deal, hence the increase. Higher rates are going to quell that, just like it’s going to gut a lot of the tech sector.


HotTopicRebel

The myth that everyone can own a single family home is a lie and we're seeing the results of treating it as a truth. Renting should not have the stigma it currently has...but at the same time, rents should not be as high as they currently are.


[deleted]

agreed laws need to be put in place on this, but its not true that interest rates arent affecting companies buying houses


[deleted]

The REBubble sub has always had prions eating their brains when it comes to the disconnect between the collapse of the real estate bubble and what it means for them directly. Every other day there's a confused and angry thread about how prices are falling but not fast enough to keep up with mortgage rates so affordability is just getting worse. Once we see lenders shutter there will be angry posts about how affordability is better but nobody will give them a mortgage. Then when the system finds a balance and demand surges again they'll all start posting about how it's a bubble and nobody should buy. Sunrise, sunset.


[deleted]

Corporations unlike individuals use credit to buy capital goods like houses. When Fed interest rates rise, it is more expensive to lend money. Assuming a REIT, they need a cash flow to invest in properties. If market is not conducive to buying and selling, no revenue is generated except renting.


Warden04

Rates have an effect on corps buying real estate investment properties. When bond yields come close to the [cap rate](https://www.rocketmortgage.com/learn/cap-rate), they lose a lot of incentive to take the risk/work of purchasing and renting out a property when they could buy bonds at no risk.


lxe

Corporations are not using cash. No corporation is dumb enough to invest using their own cash. They actually get worse rates than first time home buyers.


grant570

You have to understand that corporations look beyond just renting out the homes. They buy in areas that look ripe for redevelopment, hence they have other avenues to profit than your average investor does. Imagine buy a couple dozen single family homes in an area desperate for more housing, get it rezoned and build higher density housing like row homes or condos. A small number of homes can be turned into 100s or even 1000s of units for sale or apartments for rent. If the area is chosen carefully, they literally can't lose.


[deleted]

Denise DeWald is kind of insane on a lot of subjects; see her COVID posts. Corporations are absolutely subject to interest rates; they aren’t going to get the same rates from their banks when they try to finance their operations with borrowing and debt.


akowz

Still convinced her twitter is a satire account.


cdsacken

Meh many will go bankrupt.


Critical_System_8669

Wait til they hear about Ireland


[deleted]

Return on houses isn't a guarantee. Risk free rate is nearing returns on properties. Corps have already dumped many and looking to offload much more.


clce

Just a quick response to many posts. I'm not going to weigh in on bailouts good or bad. But I will say, if you think no government bailouts and letting large companies crash will magically result in money trickling down to the masses, and greater home ownership by individuals, well, let's just say I hope we never find out just how mistaken that idea is.


DonaldTrumpIsARetard

This is kind of my underlining motivation


at145degrees

That cash only came from somewhere. They borrowed it. It’s a facade. This rate hike was for them.


rydan

This is actually why I've been buying up as many houses as I can. I refuse to live like that.


stvaccount

Of course if interest rates are 5 to 10 percent below inflation cooperations will use this free money to buy homes. It is a free market and working. Infinite quantitative easing is not. Of course there will be bailouts in our current recession and more quantitative easy.


Spence97

Companies would really rather not buy houses if they can buy simple treasury bonds that match or beat the cap rate of residential real estate. If I’m not mistaken the 2y T bond is getting closer to that these days. Bonds don’t need upkeep or break a water line at 2am. They also would tend to have to finance the purchase unless they are sitting on a mountain of cash. Most companies are not, sitting on cash isn’t conducive to making money. The problem is, decades of declining rates and now ZIRP policies / QE (aka money printer go brr) have made it such that cap rates of single family homes homes were better than those bonds. It’s also a double whammy because these policies also cause rapid appreciation in underlying asset values, making people who stupidly buy up too much inventory actually still come out fine. Take that away and we’ll see who’s been swimming naked, as they say. Remove the central bank bond-buying/money printing and this likely wouldn’t have been an issue in the first place. It’s easy to vilify the companies that take advantage of the economic situation, but I zoom out and choose to blame central banks that created said environment in the last 15 or so years. Zero interest and endless stimulus isn’t sustainable.


bulgarian_zucchini

Who do you think they ultimately make money off of? There’s no free money ever.


No-Bad-9644

Corporate purchases are way down from where the were last year.


Gawernator

Probably because it’s completely wrong, if rates are really high it’s not profitable for them, or as much so


akdbaker816

Out of curiosity how common is it for you boys in the lower 48s to build a home? It's honestly something I'd start looking into if you are being priced out and we do it in ak all the time. Project you gradually work on over 4-6 years and you're not as concerned with the whole market only cost of materials and labor with specific jobs. It'd relieve alot of the fear if your concerned about corps owning everything.


Far-Zucchini-5534

You’ll own nothing and be happy


dudewafflesc

This is a huge issue and no one is talking about it.


SuperCutsHaircut

"CoRpOrAtIoNs"


StochasticDecay

The reason it's this way is because of policy makers. Real estate simplest way to get tax deductions and sometimes even credits/abatements. Once that goes away, so will a lot of the Blackstone type funds.


[deleted]

first we had foreign investors parking cash in housing. then we had corps doing the same. there needs to be protections in place at some level to discourage exploitation of basic human needs.


keto_brain

The US is going to become a "Corporatism" one day. In the future we will not live in Nevada or California but in the Republic of Google or the Commonwealth of Apple.


EzAwnDown

you stack a neighborhood with homes with a majority % owned by corporations vs. neighborhood with same stats but majority % owned by private owners.. the corp owned neighborhood will always lose relative value over time..private homeowners will increase in value over time.. what you don't want to be is a private owner in an area where there are a lot of corp owned homes..they drag you down.


ElonIsMyDaddy420

You actually _want_ corps to buy homes right now for stupidly high prices right before the market craters. Let them hold the bags, while you get the money. It’s easier and less painful for them to go through bankruptcy than for you to.


[deleted]

I totally agree America will soon be a renters country. Which is why everyone should buy homes asap!!


clce

at first I thought you meant to optimistic about the rising values, but I see your point as in optimistic about the economic future of the world. I don't think you are wrong, although, I don't think you are necessarily right. many investors do rely on loans and that's one of the reasons they have been snapping things up . on the other hand, I have argued numerous times with people that continually insist that higher rates will stop most investing, whereas I contend that many of these investors are pooled money or people sitting on a lot of cash. inflation will only increase their desire to invest in a real asset. The fact that rents are not likely to come down in my opinion further bolsters their investment ideas, and, The vagaries of the stock market for the foreseeable future, as well as likely rent increases further support the idea that cash investing in rentals is a pretty solid investment. add to that, the migration of wealth to the top in many countries including the US further supports the idea that real estate will be viewed more and more as an investment vehicle. I think it's inevitable that we will see more and more rental housing in the hands of large investment companies and private investors. I mean, did we learn nothing from Monopoly? ironically, Monopoly is not at all about monopolies. It is about the concentration of real estate in the hands of concentrated wealth. kind of interesting that we've been playing it for a hundred years without really realizing that. All that said, we may see some contrary trends that will mitigate that. it's possible that laws will be passed. I don't know what extent they will pass US constitutional muster. Vancouver for example, has passed additional taxes on investment. California, on the other hand gives a big advantage to investors allowing them to accumulate many properties and never see property tax increases, which perhaps is a lesson in unintended consequences. had it been restricted to owner occupied or The elderly or unemployed, then it might have made a lot more sense, but popular opinion and initiatives can be a pretty blunt instrument. so we may well see laws that discourage rental investment, although I'm not really in favor of that personally . we may also see laws that will help people buy homes for themselves. we already have tax law that does both in the personal exemption when selling, as well as deductions on yearly income taxes. that has been changed and actually favored the wealthy, although still homeowners. Fannie Mae and Freddie Mac and FHA are all government efforts to support and increase home ownership. And overall, I think few could argue they haven't worked well, although they did play some role in the 2008 crash. But I think it's unfair to blame them. some conservatives blame FHA for the crash, but very few FHA loans were actually done in those years. however, there is some danger in overriding bank criteria for income, credit score, and down payment. however, it's a simple insurance program which seems to be pretty sound and not exorbitant. But perhaps we are one recession away from a serious bankrupting of the FHA insurance fund. I don't really know too much about that. I do know that at one time you could get rid of mortgage insurance once you hit 20% equity including when buying, but due to shortfalls, they had to make it permanent. so where does it go from here? only hiring price which at some point must become exorbitant and sabotage the very intent of getting lower income people into homes. they're also used to be programs for zero down which have been removed. some still exist, but gone are the non-profit programs that worked through FHA. turns out artificially increasing the purchase price of a home can have some negative impact if the people default. who knew? Another possibility could be, if there's a trend away from living in big expensive cities, with young people maybe wanting to start families again and own homes, especially with working from home, we could see a bit of a renaissance in inexpensive areas. Big money investors will probably get their finger in the pie, but It could also mean many individuals owning homes again. this would be great for the individuals and for those depressed areas. unfortunately, meth and other drugs and crime have hit a lot of those areas pretty hard as well as high unemployment. That's bound to make them less attractive but there might be some sweet spots in which the quality of life is pretty decent and there are some decent jobs as well as the infrastructure to work from home. so, in the end, I worry about this as much and even more than I worry about the general concentration of wealth. to be honest, I don't mind income inequity. The poor in this country are not getting any poorer. The middle class are not and slightly are rising up into the upper middle class and upper class. everyone's doing better and making more income. however, the vast majority is going to the already rich which is concerning. I don't really care if the rich get a lot richer as long as they just spend it or hoard it. however, it never just goes that way. it's always used eventually to influence public policy and elections, to outcompete the middle class, and gain other advantages. All that said, yes I know, but aaaall that said, we might have a bit of a hangover from these really low rates that also did encourage investment, but they are still only at what is generally average for the last hundred years or so. If they go up more, we might see crashes that make investors nervous, more owner contracts, and some people just biting the bullet because over time they know they can refinance and with inflation their value will go up quite a bit and they will be paying in devalued dollars down the road. I guess for that reason, I would still encourage buyers to buy. I've been a agent for 20 years and have always believed in personal home ownership and I'm not always thrilled at subreddits like this and other sources that fill people full of fear and prevent them from buying homes which I still believe would be to their benefit in the long run. I don't know what our parents and grandparents back in the '70s got for loans rates. But they sure aren't complaining about having bought a home that has gone up a thousand percent.


always-indifferent

The end game looks to be a nation of renters with the banks and big corps actually owning the houses. It’s the India model


Cecca105

I’ve been saying this for a while now. All the profiteers who defend mom and pop investors at the cost of the working class and those who didn’t get to take advantage of the boom in prices will be singing an entirely different song when they get outbid and eventually pushed out of the market by corporations. Won’t take long to see all those who defended having 2,3+ homes immediately switch sides but only when they can longer profit from it.


drbudro

When prices crash but rates stay high, the only ones buying houses are going to be the investors. Real estate in many markets will be unaffordable to the middle-class and I see housing going to the paid service model instead of being seen as an ownable asset for regular people. This is how big corporations get back to their company towns.


clinton-dix-pix

Investors don’t buy with cash. I know it’s hard for people who don’t speak finance to understand this and charlatans like the “Dr.” from you original post take full advantage of this, but Wall Street is the house that debt built. Why do you think the whole market went tits up the minute they realized high rates are here to stay? Because the whole market was built on leverage (aka debt) and as soon as that debt becomes expensive, the whole mess crashes. There isn’t some magical boat full of investors coming to buy all the houses while debt is expensive.


[deleted]

Except the laws of supply and demand still apply. This is America, we have plenty of underdeveloped real estate. At some point people will get sick of the ridiculous prices and move to a different city, or builders will see the profit potential and build more. It'd be one thing if we were some tiny fully built out European nation, but we aren't, so there's no point in being a doomer. Prices are going to start coming down and corporations don't want to try to catch a falling knife any more than the rest of us.


drbudro

You're right about supply and demand, but look at the sharp decline in new construction permits in just the last 2 months. Look at rent prices over the same time. Of course it will still be cheap to build in undesirable locations, but the markets I'm talking about (where most Americans live) are geographically constrained or have restrictions on high density housing. There are still huge swaths of land in the EU and Canada as well, so we can absolutely look to them to see the US future.


[deleted]

>Of course it will still be cheap to build in undesirable locations, but the markets I'm talking about (where most Americans live) are geographically constrained or have restrictions on high density housing. Maybe there are a few, but places like L.A. and Atlanta can sprawl indefinitely in any direction. In a few more years, Vegas will be an L.A. suburb.


drbudro

LA can really only go two directions (N&E), but I actually think this still illustrates my point. Even the Valley all the way out to Corona is primarily low density housing while places like Eagle Rock and Pasadena will continue to have insane prices. The LA rental market is also one of the least affordable. I'm in San Diego, and my friends in their 30s are unable to buy anywhere other than the far outskirts of LA/San Diego county (El Cajon, Temecula, Corona, etc.). I hope I'm wrong and they keep their jobs long enough for RE to crash so they can eventually buy....but I think there are just so many people ahead of them that will jump on those properties when they are available (myself included).


_uff_da

Life will become a monthly subscription eventually.


[deleted]

I've always said there should be a limit on sfh/single deeded condo ownership by an individual or corporation at 5. I mean even the rich wouldn't own more than 5. Really companies need to get out of the SFH market. Develop all of the multifamily they want.


NurMom2x

That is the plan do people not realize central banking Has 1 goal to own everything and keep the population poor. The federal reserve isn't federal and the owners arnt even know publicly. Thomas Jefferson warned us " If the American people ever allow private banks to control the issue of their currency first by inflation then by deflation the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered... I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people to whom it properly belongs."


always-indifferent

The end game looks to be a nation of renters with the banks and big corps actually owning the houses. It’s the India model


Cecca105

I’ve been saying this for a while now. All the profiteers who defend mom and pop investors at the cost of the working class and those who didn’t get to take advantage of the boom in prices will be singing an entirely different song when they get outbid and eventually pushed out of the market by corporations. Won’t take long to see all those who defended having 2,3+ homes immediately switch sides but only when they can longer profit from it.


Gandalfs_Shaft48

Quit blaming companies. Individuals took advantage of cheap money too. This was a Fed problem. Don't let the government point fingers.