bragged about being able to undercut first time buyers and also bragged about being connected to Bain Capital.
I the the letters away.
I am told that quite a few homes in my subdivision ahve been bought up by corporate interests, which explains the recent drive to appoint an outside firm to "administer" my 28-year-old subdivision (not needed) - with very high HOA fees replacing our $25 a year fees - the corporations can deduct that stuff as expenses, the rest of us just are out money we cannot afford.
We defeated the request to do this, but expect it to keep coming up.

These purchases are increasing property values and while many first time buyers are being locked out, people whose homes were underwater are seeing them go above water, allowing them to refi and save their homes.

Renting really is more appropriate than buying for many people, but often rental properties are hard to find.

No kidding. Except for the 2 years in NYC. But then I had a good job in Manhattan and lived in Queens. Any other time it was cheaper for me to own than to rent. Besides, I have an utter horror of making payments on anything forever.

When we first married my ex wanted to rent, but I convinced him to let us live on his salary and save mine, so when we left NYC and of course usually had base housing for years, I saved like a demon. He'd run up crazy bills and then turn the checkbook over to me to get us back in shape, but I damn well made him let me use his paycheck for that. The first house we bought was in the Los Feliz area of L.A. and we paid cash. Does everyone get that chance? No. But when they do, they should make every effort to live well below their means for as long as possible in order to move up safely at a later date. After our divorce, my ex went through bankruptcy at least 3 times I know of. Today he makes $ hand over fist, but unless he's relinquished all financial dealings to his 4th wife and unless she's a lot smarter than him, he'll still die in hock up to his eyeballs. Part of my horror of personal debt comes from those years with him. But like a lot of tragedies, it helped innoculate me against worse mistakes.

that means they are re-inflating the housing bubble and setting us up for yet another crash.

of credit that boosts purchasing power so high it becomes out of balance with incomes.

What is happening is banks are buying these homes themselves OR are loaning cash to others to do so. These are INVESTORS who do NOT mortgage these properties (or if they do it is AFTER they buy them). This ia a variation of traditional home building programs. Banks loan money to people to build homes or other buildings (Including malls, and large buildings), then when the building is complete, then and only then is the building mortgaged, which is used to pay off the Construction loan.

Instead of using these cash loans to build new buildings, investors are buying homes that they think are cheap and whose value will go up. This happened in the mid 1930s, lead ot a brief increase in home prices, then an even worse drop in price (Prices of home only established in 1938 when FDR finally decided to do a massive stimulus program that finally kick the economy in the ass and got it moving just before WWII started).

In my opinion, and this in opinion of others, prices are still to high given wages. Sooner or later someone is going to have to take the hit as the prices of these homes decline further (or if the Federal Government ever wakes up and does a massive Stimulus program and thus increase wages so people can buy these homes, Please note a side affect of such stimulus programs is inflation, which has the effect of decreasing the value of homes in real terms, even as such homes hold their value in terms of dollars, i.e. $100,000 home stays at $100,000 but when you take into consideration inflation its value in real terms drops to $90,000).

My point is the situation is do to the massive amount of money the Federal Reserve has loaned to the banks, the banks have massive amount of cash, but they do NOT want to loan any of it to anyone but their most secure clients, people with money. People with money is thus borrowing this money, generally by personal loans and then using the cash from these loans to buy these homes. In normal times they would mortgage them later to get a lower rate on their outstanding loans, but with rates so low there is no incentive for them to do so. Why convert a 2% loan to a 2% mortgage? In normal times it would be a 4 to 5 % personal loan being paid off by a 2% Mortgage loan and thus such investors would buy with cash, they mortgage to raise more cash. Right now they do NOT need to mortgage to get more cash for the Federal Reserve is giving money away to its safest, i.e. richest customers.

Now, they are people who say Quantitative easing (QE) of the Federal Reserve is Ben Ben Bernanke plan to end the present economic disaster. This is based on his observation that the Great Depression would have been avoided if the Federal Reserve at that time and printed a massive amount of money. This is what Ben Bernanke has done, but he forgot that it was money given to the bottom half of society that kicked the economy out of the depression NOT money to the top 1%.

Now, I can NOT blame the Fed completely, it can NOT give money to the bottom half of the economy, it is NOT set up to do so. On the other hand Congress CAN by eliminating the Social Security tax (Which hits lower income people more then the Income Tax), increase spending on Welfare, and pay for a massive stimulus program to get people working. The problem Congress has preferred to cut Income Taxes on the Rich even through that will have little affect on the overall economy (in fact, my people making more then Median Income, roughly $50,000 a year, used they tax cut to pay off debts, which in economic terms is considered increase spending on SAVINGS, which is the worse thing for an economy that needs to kick. People below $50,000 year rarely pay off debts, they just do NOT have the income to do so, but will spend anything given to them to survive, thus any money going to them will be spent on buying things, and that is what the economy needs at the present time).

Thus Quantitative easing (QE) can not get us out of this present economic debacle, but it is all the Federal Reserve can do, Congress can get us out of this mess, but refuses to do so for the GOP control the house and the GOP wants to reduce federal spending more then anything else, even if it means the destruction of the US. Hopefully the US will wake up and see that they need to vote for radical lefties just to scare the moderates to vote for increase spending on the poor. Thus nothing will happen unless the GOP is kicked out of the house OR the economy goes really bad (And it is headed that way).

Home prices usually keep up with inflation.

And the 1928-1938 period is the most like the one we are in today. Housing lost roughly 95% of their value between those two dates (90% if you ignore the devaluation of the Dollar in 1934, prior to 1934 a Dollar was set at $20 to an ounce of gold, in 1934 it was reset at $35 to an ounce of gold, in 1971 Nixon stopped trying to keep the dollar at $35 to an ounce of gold, but that is a different time and story).

1938 is the bottom year for housing prices and that is why a lot of people like using it. In many ways it was to low, but that is when prices bottomed out.

Worse, prices had Several "Bottoms" in the 1930s. The first one in the fall of 1929 AFTER the October Crash. It was called the "Sucker's rally" by March 1930, Stock Market prices were almost up to the level it was in October 1929, then it went into a steady decline till FDR was elected, all the banks had closed down (while Hoover was President). In March 1933 the stock market bottomed out and started to climb after FDR declared his "bank holiday" and then reopened the banks at the end of that holiday and they stayed open but heavy regulated by the Government.

There were a couple more "sucker's rally" in the 1930s, during the last one the GOP told the country it was time for FDR to balance the budget, which is tried to do and forced the country into its final recession of the Great Depression. To get out of it, FDR did a Massive Stimulus program, you be surprise what was built under that program and still being used. That massive stimulus program kicked started the American Economy and the US was out of the Depression by 1939, through the Stock Market did NOT get back to its highs of March 1930 and the Summer through October 1929 till 1954.

I am sorry, housing prices need to come down, either through deflation (the worse way to do it) or massive inflation (The better way, i.e. a $100,000 home retains its $100,000 price tag, but do to inflation those dollars in constant terms equal less then $50,000). In many ways such massive inflation was what economists said was needed in the 1930s, but FDR refused to do till 1938 and FDR's realization that unless he did something massive he was looking at election defeat in 1940.

Housing stayed mostly low till the 1970s, then started a slow but steady increase. . In the 1970s wages stayed up with inflation but that ended in 1980. Housing continue to increase after that date, and people used the increase in their homes to borrow money to buy things (that in previous decades such new items had been paid out of increase wages not increase value of their homes), This policy of using their home as a check drove the prices of homes up and up till it hit its peak in 2008. Once people where no longer able to use their home to pay for their increase living expenses, the economy went into its present poor condition.

Right now housing is to high. People should be paying no more then 1/3 of their income for housing. That is the traditional ratio. If you income is below $50,000 you are often paying 50% of more and that is NOT sustainable. In fact what kicked off the 2008 recession was people who had purchased homes just a few years before, on the basis housing prices will always go up, could no longer sell their old homes for more then the mortgage on it and could NOT make the payments on the mortgage. That implies prices were to high. Rent is traditionally higher then owning for when you rent you can abandoned a house in need of repairs, something an owner can not do.

Right now, rent is cheaper then owning, and that is another sign of a bad economy. Housing prices has to go down so that owning a house is cheaper then renting but housing prices has NOT done that yet. Thus another sign prices of homes are to high.

The economy is in decline and no one wants to do anything about it that would actually work. As long as that is the case, you will see attempts to keep housing prices up but it will be all artificially for incomes can not justify the prices of these homes. People can not afford them and as long as that is the case, expect a slow drop in the price of homes (not fast, for people do NOT want to take a lost, but a slow drop in prices).

-Laelth

Yes, because it's flat and capped it is regressive. However it is a fee for access to an insurance program. The paid in fee sets the payout limits, the first 9k/yr of which returns at 90%, with the last 50-60k returning only 10% (the tier in the middle returns 35%). This cap on income also translates to a cap in payouts. So while by a traditional shallow look at just the tax, as opposed to how that tax is applied and operates in the system, you get a faulty outlook on the payroll tax. Furthermore, by erasing that tax you destroy the dedicated funding stream to social security, forcing that program to exhaust its trust fund and then receive all future compensation from the general fund which makes it susceptible to budget cuts. This would lead to the destruction of the program.

The better solution for social security is to raise the cap to capture 90% of all incomes, then tie cap increases to growth in top 5% wage growth (as opposed to CPI-W like it currently is). Then re-balance the tiers more progressively by adding a fourth tier and shuffling the money around (My ideal would be 90% up to FPL and linked there, 50% up to 50k, 25% up to 100k and 10% or 5% up to cap with the remaining tiers (and payouts) being tied to a new inflation index of CPI-E (Elderly CPI)). Also provide a one time step increase at the 80th birthday. Reduce age to program access back down to 65. Install a gateway to enter into the program with full benefits at 62 for labor intensive workers. Also adjust all current participants to a glass floor level equal to FPL. But, there isn't the political will to accomplish this program.

I agree with you on increasing welfare and infrastructure stimulus spending. I'd go one step further and place every person in America on food stamps, but institute a flat tax, where a single adult making 50k/yr is the break even point for benefits received (and then index this rate to CPI-Foodstuffs category). This would have the net effect of the ultra rich paying for thousands of peoples daily meals. I'd also wipe the current tax tiers, replacing them with the 1950 rates indexed with a new 0% starting at 17k and all other rates adjusted accordingly. Also wipe out the tax law, restore the EITC and allow a deduction for all interest paid (not just housing mortgage), though I'm open to further deduction suggestions. Finally send the marines to seize the cayman islands and grab all their banking sector financial information, then tax the hell out of them (do this simultaneously without notice across the globe everywhere that we think we can get away with it and not get nuked). The last one is just for fun and not really serious, but none of them will happen for reasons that are obvious. The rich control the levers of government, and so the rest of us are screwed.

Median household incomes have fallen about 9% in about a decade, and housing values are out of range of the average dude/dudette. In part that's because of downpayments and the very high cost of FHA insurance premiums (which otherwise would make housing affordable for those who have very low downpayments).

Sure, these purchases by investors are lifting the market now, but not in a stable way. These people plan to hold for a few years and then sell, and when they do the market can go south quite quickly.

Also, the investors themselves are funded by the Fed's easy money. They are borrowing money very cheaply to do this. This sets the housing market up for a fall back as soon as interest rates go up again or as soon as the Fed stops buying 85 billion of bonds a month.

When people buy houses to live in them using mortgages they can afford, the housing base is very stable. When investors buy, the housing base is very unstable. When speculators buy, the housing base is unstable.

Right now, as soon as investors stop buying in many areas prices are going to want to head down.

What are investors going to do with the homes, flip them, rent them out? Neither is a money making proposition for investors. The only money they can make is holding them to sell at a higher price. In the meantime, the homes have the cost of up keep and insurance. And it is too hard for a prospective home buyer to get any financing. This is a mini- bubble that will soon burst.

If I had some money to invest, it would not be in a home.

short-term income as well as an eventual long-term profit from sale.

What will have to happen is private mortgage companies re-entering the space and originating loans that don't get sold to Fannie and Freddie.

...or a few do, the market has been cornered and We The People have less control over rent. This is the direction monopolies head.

Small landlord, big landlord, they all will charge renters as much as someone will be willing to pay.

Only way to control one's housing payment is to buy, which isn't an option for everyone.

Now only a few grandfathered apartments in a few cities are still rent controlled,
rent control is all but dead.

It also leads to housing shortages and poor quality of available housing if you try to implement it across the board.

First, as more and more housing is purchased by one person, the price of the remaining houses go up, and the buying either runs out of money or finds that other investors have purchased those homes.

The problem then is renting those homes out. If you did control all of the homes you would have a monopoly and set the price as you see fit. If the price is set to high, other people will build more houses in the area, or just outside the area the first buyer controls. Tenants will move to those cheaper homes, even if the cost of transportation to work is higher, as long as the reduce cost of rent, and the increase in cost of transportation set off each other. Sooner or later the first home buyer had to match those rent prices or find himself with lots of employ homes. Thus it is HARD to get a true monopoly on housing, not impossible but hard. You may see a monopoly is some areas where people will pay a preference for (Around Central Park in NYC for example) but when those value go to high, people will look elsewhere (and in NYC that means anywhere the subway goes).

Thus housing rent is set by the market. To high, people will look elsewhere (and if none is available, they will look for employment elsewhere). Most public housing projects built in the 1930s through the 1960s tended to be near factories where most people living in those project worked. The government built those housing for prior to the 1950s most people walked to work and if housing was to far away, they would look elsewhere for work (or just rent a room instead of a house, and thus share the cost of the house with other people who needed housing). The factories these workers work at needed workers who in turn wanted decent housing, thus public housing was built (and most such public housing had a requirement that tenants had to have a steady income, thus people on welfare could NOT get into them till Congress changed the law in 1974, We have to remember the housing was built for factory workers NOT people on welfare and that is what Housing Authority saw who their tenants were to be, Congress in 1974 decided that was unfair and changed the law the public housing should go to low-low and Low-low-low income people, prior to 1974 people on welfare were to poor to get into most public housing in the US).

As to regular (market) housing, if the price is to high people will go to a cheaper part of town. If a cheaper part of town does not really exists, you end up in an area where you have no low income workers and jobs such people normally do go either unfilled OR filled by people who are paid premium so they can afford to live somewhat close to the area they work in. In most urban areas you can walk 3 miles a hour, or about 1 mile every 20 minutes. In the days where people walked to work, if the price was to high, they were more then willing to walk 20-30 minutes from their home to work. When such people obtain automobiles, that 20-30 minutes expanded to 10-20 miles. That leaves a lot of area for housing to exist in. Outside the largest cities (Chicago, NYC, Los Angeles etc) most cities AND their suburbs are within one county, or about 20 miles across. Thus most people can live in a huge area with various levels of value of housing if they own an automobile (and most do). Thus it is hard to monopolize housing.

If the area within commuting distance is to far from a business, that business will move closer to where their workers live or demand that the local government fix this problem by providing mass transit, Such a demand for most transit occurred in the City of Pittsburgh Suburb of Robinson in the 1990s. Robinson boomed for it was near the Pittsburgh International Airport and thus had an excellent road system to it, but almost no mass transit. Business moved to the area so that people moving to those suburbs could shop in their stores. The problem the people they wanted to hire workers in those stores but the workers they were willing to hire at a pay such workers were willing to accept could NOT afford to live in such suburbs and could not afford to operate an automobile, Thus the stores had a problem getting enough workers. They demanded that bus transportation be increased in the area so their workers could get to work, but then refuse to pay for it. In recent years when the Transit authority had to cut back service do to lack of income, these same stores complained again and demanded why the transit system cut service to them BUT not to the inner cities routes. When it came out that the inner city routes were profitable and thus subsidizing the suburban routes this complaint ended. Such business still complain of the lack of bus service for their workers, for they will NOT pay such workers enough to pay for their housing, food AND an automobile, but also refuse to provide any funding for such bus transportation. They end up hurting for workers, but so far enough workers have access to cars to keep the harm to a minimum in Pittsburgh. Elsewhere it is a constant source of problems. How do you get the cleaning crew to the work site every night?

Thus people can be priced out of an area, but that also means those areas get reduced "services" for sales staff at most stores tend to be low income people (as are the Janitor services). When most urban people did NOT have cars (prior to the 1950s) stores were careful to be located where mass transit operated. When most urban dwellers obtain cars (about 1954) stores started to ignore mass transit and basically decided only to hire people who could drive to the store. This increase cost was passed on to the workers, but most workers wanted to keep their jobs so they went along.

This had the effect that most Americans today own cars and thus have the option of going by automobiles to the suburbs to work. As long as gasoline is "cheap" that will continue, but if gasoline price per gallon starts to get the price of minimum wage per hour, problems set in, mostly related to the fact that at that point most workers can NOT buy the gasoline to get to work. In many ways the 2006-2008 recession was driven by the price of gasoline and Congress's reluctance to increase the minimum wage. Once minimum wage went up and Gasoline prices declined, low income people can travel from low income areas to high income areas to work.

Just a comment that housing prices can be so high that people can NOT afford to live close enough to their jobs that the price of commuting is acceptable. As long as the price of gasoline continues to drop OR holds its present price, low income people can commute to work in high price suburbs. The problem kicks in when the price of gasoline goes up (and while the price of gasoline is expected to hold its own till 2017, come 2017 the present "boom" on oil production in the US, enters a period of expected rapid decline, thus you will see a massive increase in the price of gasoline starting in 2018 and with it suburbs will have to figure out how to get their low wage workers from the inner city to their high price malls.

Side Note #1: The present "boom" is shale oil (more correctly called "Tight oil&quot is expected to boom till about 2017, at which point the US may become for the first time since 1969 a net oil exporter. The problem is known "Tight oil" locations have a short life span, roughly 18 months. Thus while Tight oil is expected to expand till 2017, such oil fields are constantly in a race to drill more wells to replace depleted wells. Till 2017 that race is expected to be "won" by the new fields being drilled, but come 2017 that will reverse for right now the "Biggest" of these "Tight oil" fields are being drilled and the new fields being drilled are less profitable smaller fields. Thus by 2017 the number of such wells will have increase tremulously, the total oil from such fields will start to drop. With that drop, everyone is expected the price of oil to go up. By 2020, it is estimated that the US will be producing the same amount of oil as it did in 2012, by 2025 what the US was doing in 2000. Thus prices will jump, maybe to $10 a gallon by 2020, higher by 2025.

Side note # 2: Rent Control was done in most US Cities during WWII, mostly do to the fact the US had a problem. When the US drafted young men into the Service, many were married with children, other were the sole income source for their aged parents. Worse, these older draftees (and people who re-enlisted) were people the military wanted and needed for most of them had skills the military had severe shortages in.

Do to the economic boom caused by the massive spending for WWII, house rents went through the roof in most urban areas for that is where most factories were located at that time. Workers in the factories were willing to pay top prices for housing, and landlords wanted that money and were more then willing to kick out such wives, children and aged parents. When their sole source of income, the Soldier, Sailor, Airmen or Marine in the Service found out about it, they would ask for a hard ship discharge so they could move back home and take such factory jobs so they could keep their relatives housed.

On the other hand, the Military wanted these older recruits for they had experience, often past military experience, that was the most needed for the massive expansion of the military the military was undergoing in the early days of WWII. The military told Congress, and Congress pass a law forcing cities to adopt rent control so that such wives, children and older relatives would NOT be kicked out of their homes so that their husbands, fathers and sons could stay in the military and perform the duty the military needed them to do. The alternative was to release such hardship cases, but that would mean the Military would lose the people with the most skills that the Military needed. That alternative was unacceptable so Rent Control was introduced. Congress had two bad options, and Congress picked the least bad option.

At the end of WWII, Congress drop these requirements and most cities dropped Rent control when Congress told them they could. NYC was the big exception retaining it to this day, Berkley adopted it in the 1960s. I am less familiar with the case in regards to Berkley, but in the case of NYC is was more to keep apartments cheap for the well connected for most rent control as to low income houses were either abolished or bypassed. Thus the problem with rent control is that unless people with money want it to keep their own rent low, it has no support among local government and thus not done.

-Laelth

You can definitely make money renting out a house - I am. Bought a house, employer folded 6 months later. Started renting the house since I couldn't cover the mortgage, and the purchase was too new to not take a bath on selling it.

House is still rented. Turns a small profit over the mortgage and other expenses. If there was no mortgage, I'd be making a bunch of money - about 9% a year. Scale that up to wall-street-sized pool of money and it could do a nice return.

I know people in China are doing this - investing X dollars in real estate or an American based business can get you a green card. They have realtors that specialize in this - selling property to Chinese investors, sometimes sight unseen. And, they also have tours that brings groups of Chinese investors here to the US with the purpose of buying property for investment.

I think it's either $250,000 or $500,000. I think you have to hold the investment for a certain length of time as well.

The amounts are $1 million in urban/suburban areas and $500K in rural areas ... but the catch is that the business they invest in or start has to employ a certain number of people within a certain time or they don't get a green card.

I know people buy motels to qualify and it is easy to employ people if one runs a motel but a private house cannot generate sustained jobs.

as an investment.

just as they did with mortgages.

That "high demand for rentals" is because the banks illegally foreclosed on houses, by the millions,
so now people have to rent.
The banks and hedge funds had plenty of cash, thanks to the Fed giving them free money, so they can buy up choice markets
to rent.
I expect the rental bonds to be as toxic as the mortgage bonds were.

Sometimes real people do manage to do well flipping...my daughter in law and her spouse in So. Cal. just sold their first fixer upper, making 200 K profit, and bought a better house, they will be selling that one sooner than later.
Be interesting to see if they beat the bubble popping.

..... the last I heard these investors were getting out of single-family homes after buying up lots in 2009-2011.

Fact is investing in and renting houses is a great business but it is a hands-on business. Big business farms out all of the critical operations (qualifying tenants, maintaining the property) and third parties who rarely do a good job of these. If you put a crap tenant in your house, you are unlikely to make a profit.

In any event this is driven by several factors a strong one being that lots of people got burned in the last housing debacle and are simply not interested in owning a house. IMHO, no, not a humble opinion a FACT, you can never win by renting. When you rent, you are paying every cost associated with owning a house plus profit for the real owner. The ONLY reasons not to own a house would include:

1) don't want to or have the ability to stay in one place for at least 5 years or
2) housing prices in your area are inflated.

I realize that 2) is somewhat subjective, but I claim the truth can be discovered if you really want to know.

K&r