wall street

Wall Street Firms Are Buying Up Single-Family Homes

It is no secret: We have an affordable housing crisis on our hands. Whether you are renting or trying to buy, it is becoming more and more difficult to find something within your budget. The is a complicated issue, however, one reason the prices are higher than ever has recently come to light. Wall Street is buying up many of the single-family homes and it is driving prices through the roof.

Wall Street Buying Up Single Family Homes

That’s right: The big bad investment banks are at it again. They are purchasing single-family homes left, right, and center. Why? So they can profit off of the ever-increasing property values and rental costs.

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These increasing prices of single-family homes are in part due to the pandemic. Now, people are looking for more detached living situations with more private outdoor space, like gardens and yards. The COVID-19 pandemic has increased the demand for single-family homes and detached rentals as people are seeking out more space.

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“as demand for more space and outdoor amenities remains, detached rentals, in particular, are experiencing accelerated growth with a 7.9% year-over-year increase in April, compared to growth of 2.2% annually for attached rentals.” reported a News Publication.

On top of that, the average price for a home in the United States increased by nearly 25% between June 2020 and June 2021.

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Investors Bought Nearly One-Quarter Of The Homes

John Burns Real Estate Consulting reported that in the first three months of 2021, investors bought nearly one-quarter of the homes for sale. Though this number also includes individuals buying vacation homes, investment banks BlackRock (BLK), JPMorgan Chase (JPM), and Goldman Sachs (GS) were prominent names on that list. While this is adding to the driving up of prices, the reality is big investors still only own about 2% of the homes in America. This equals about 300,000 homes. (4)

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“The argument that [institutional investors] are buying every single house out there is not accurate,” said John Burns research director Rick Palacios.

This means the overall impact has a ceiling, though it will be different in different parts of the country.

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The Problem With Corporate Landlords

Besides prices going up, there are other inherent issues with corporate landlords. For many people used to a more personal touch with the “mom and pop” type landlords, these massive banks use property management companies for their rental units. This means more complicated steps to follow when you need something repaired. It also means an increased threat of eviction if something happens and you can’t make rent on time. Simply put, it is less personal interaction.

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Some people say that rental standards are going up because of this style of renting. Naturally, this is a good thing. Though not everyone agrees, there is a certain amount of protection that tenants do have when renting from these companies. For example, private landlords don’t have fear of public backlash if they treat tenants badly the way corporations do. It benefits them just as much as the tenant to make sure everything is always well-maintained and working properly.

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They Haven’t Stopped At America

Big American companies are also buying up properties in England, too. This is causing the same trend – the ever-increasing cost of both renting and buying homes – to happen there, too.

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“Institutions poured a record £3.7 billion ($5 billion) into the UK build-to-rent sector in 2020, almost a third of which came from first-time investors, according to real estate consultants Knight Frank. This year’s number is likely to come in even higher, with inflows in the first three months of the year alone reaching almost £1.3 billion ($1.8 billion) — a 16% increase on the same period last year.” said CNN Business.

China has recently implemented laws and regulations to help with this in their own country. According to the Chinese president, housing is for living in and not for speculation. There is no word on whether or not America also plans to implement rules such as these ones, as well.

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Sources

  1. Wall Street is buying up family homes. The rent checks are too juicy to ignore.” CNN. Hanna Ziady, August 2, 2021.

Julie Hambleton
Freelance Writer
Julie Hambleton has a BSc in Food and Nutrition from the Western University, Canada, is a former certified personal trainer and a competitive runner. Julie loves food, culture, and health, and enjoys sharing her knowledge to help others make positive changes and live healthier lives.
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