New >> People want someone to blame for today's dumpster fire of a housing market.

It feels terrible to be priced out of the market as a new homebuyer and BlackRock is a convenient scapegoat.

But the real culprits aren't on Wall Street. (Thread)…
Institutional investors (like BlackRock) are an absolutely tiny part of the market.

They own around 300,000 single family units as of 2019. For context, there are 15 million one-unit detached single family home rentals and 80 million detached single family homes total.
Additionally, it's not even clear that they're gaining in market share over the last year. John Burns Real Estate Consulting put out research tracking the investor purchase percentage of total home sales and it has been declining.
CoreLogic says that small investors are actually what's been driving the increase in US homebuying rates, not institutional ones like private equity. (This is pre-Covid, we don't have thorough data yet for the last couple of years)
The John Burns research is what most articles (including that very popular WSJ article) are using to claim that institutional investors are a competing with normal homebuyers and driving up home prices.

But... the research doesn't really say that.
First, the authors are clear that they do NOT believe we are in an investor-induced home price bubble today.
Importantly, they are tracking *all investors*, not just private equity. Essentially they look to see if the zip code on the property tax records matches the home's zip code to see if it's owner-occupied.

That includes not just PE but small landlords, house flippers, and iBuyers
So it's hard to extrapolate from this data exactly who these people are. There is a lot of evidence that there are a ton of new second home buyers over the last year.

And many realtors have said they've observed all-cash purchases as being rich out-of-towners outbidding locals.
But we've also seen many reports that institutional investors are upping the ante. So it's certainly possible that they will increase their market share but they are still a *very* small part of the overall market.
Okay, but even if they're a small part of the market, couldn't they be outbidding regular Americans when they do try and buy homes?

Maybe, but there are reasons to be skeptical that they're directly competing with would-be normal homebuyers.
Laurie Goodman (@MortgageLaurie) explains that institutional investors have a comparative advantage in buying homes that need tens of thousands of dollars in repairs. So they're usually competing with *other* investors like house flippers or iBuyers.
In a market this competitive it's certainly possible that some people are trying to buy homes that need $50,000 in repairs but... it's not really clear to me that it's a bad thing if they are prevented from doing so. That's a terrible investment for most people.
John Burns's research also points to specific submarkets where investor activity has been very hot. But single family rental lobbying group (@NRHCouncil) claims that they have incredibly small market shares even at the local level.
But! If we continue to block the development of new homes it's feasible that these types of investors will grow to be a larger part of the market. @_willparker_ has a great story on the built-to-rent market that is starting to bloom.…
There's a secondary question to all of this of whether it would be bad if institutional investors had a larger market share.

@francescamari had a great piece about the ways in which PE firms harm people and the inherent asymmetries of power and info.…
Some assume that small landlords are better and less exploitative.

While it's true they don't have the incentive to return $$ to their shareholders, they do often ignore tenant law/fair housing law. We need more research to know which is worse for tenants!
But even if these large investors are competing directly with would-be homeowners, why should we preference homeowners over the renters that will be able to live in these homes?

There's a shortage of rental housing *AND* homes for sale!
The fundamental reason these large investors are gaining market share is because we have turned housing into a quickly appreciating asset. These companies are just searching for yield!

Build more homes! That gives tenants more power and it reduces the incentive for PE to invest!
Blaming BlackRock is just temporary catharsis. The real culprits look much more innocuous, and they'll be much harder to root out.

NIMBY's and the local officials they elect have blocked new housing for decades. Today's market is the necessary result of those policy choices.
Full piece here!…

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More from @JerusalemDemsas

7 Jun
New >> Is there a housing bubble? Maybe.

Does the answer to that question really change what the long term solutions are to our housing crises? No.…
The case for calling the housing market a bubble:
- home prices have shot up
- the market's "frenzy"

@RobertJShiller described this aspect of bubbles to me as "a sort of epidemic of an idea, of a feeling of what one should do with one’s life or leisure or what’s cool." Image
More reasons:
- Many arguments against bubble-theory are that the fundamentals (low interest rates, Millennials entering the market) would of course lead to higher prices.

But as @AliWolfEcon explains, that's been true for years. So why the rapid price increase now? Image
Read 8 tweets
26 May
New >> Yesterday, @glennkelman tweeted out a bizarre anecdote about a woman promising to name her first born after a homeowner if they picked her bid.

It showcases how housing shortages can open the door to discrimination and fair housing violations.…
In an extremely unbalanced market where sellers may get several offers well above asking price, they have the to choose between similar bids with non-price metrics, for instance how much they like the buyers (often based on a personal cover letter).
Hobart, a lawyer who lives in the suburbs of Pittsburgh, relayed to me how weird it was to do this as he looked for a house with his wife last year:

We were "trying to have some way of standing out by saying that we’re nice, normal people" in our cover letter.
Read 5 tweets
26 May
Biden and Klobuchar had two separate zoning proposals in April. Now @kristoncapps reports that the Biden team is just adopting Klobuchar's idea (and abandoning their original one?)

This is weird because they were complementary plans!
Biden's original plan was to require cities to act before getting the funding and Klobuchar's plan was to help them get there!

Neither of them would completely fix the problem of course but it would be helpful to have multiple bites of the apple here.
Here's my article on Biden's plan and Klobuchar's plan as well as @kristoncapps' article from this AM!………
Read 4 tweets
21 Apr
New >> @JohnFPfaff helps me think through how accountability and justice can be at odd with each other and how that might play out following the conviction of Derek Chauvin.…
Following the conviction we heard Rep. Jim Jordan call it proof that "the system works". He's not alone in thinking that.
Then we talked about something I know a lot of criminal justice reform advocates struggle with. Advocating against mass incarceration means shorter sentences for violent criminals. So how should we think about what an appropriate sentence is for someone like Chauvin?
Read 4 tweets
16 Apr
New >> I talked to Amy Klobuchar about her bipartisan plan to tackle the housing supply crisis.…
While Biden's recently announced grant program will provide $$ to localities who remove exclusionary zoning policies, Klobuchar's program helps them get there. ImageImage
There are localities that are interested in figuring out how to upzone, but don't have the in-house resources to do it. Klobuchar's grant program would give them the ability to hire or contract seasoned planners who can develop a plan for them. Image
Read 4 tweets
9 Apr
New >> A new study found a significant decline (15-20%) in police homicides in places that saw BLM protests from 2014-2019.

The flipside? The study shows that places that saw BLM protests also experienced a 10% rise in murders over 2014-2019.…
Thanks to Travis Campbell at UMass Amherst (who smartly doesn't appear to be on twitter) for walking me through your research and h/t to @owasow for flagging this piece of research and talking me through the underlying protest literature.…
First, on the good news. Not only did BLM protests correlate with a significant decline in police homicides. The larger and more frequent the protests were, the bigger the decline.

The decrease is also persistent, widening 14 percentage points from year 0 to year 4 of protests. Image
Read 6 tweets

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