“America’s housing crisis is a longstanding problem. But recent reports of private hedge funds buying up detached houses and townhouses is likely to make an already difficult situation even worse. When hedge funds purchase such properties, those homes are not likely to come back on the real estate market. They are gone for now—and probably for the long term.” writes R. John Anderson for Common Edge.
The housing supply shortage has been fuelled by a number of things:
- House prices have been steadily rising but wages have remained the same. Saving for a down payment on a house has become less affordable.
- A shortage of skilled construction labor has led to a slowdown in the construction sector. Housing supply just can’t keep up with demand.
- Although the housing crisis is a national problem, some areas are feeling the pain more than others.
Now private hedge funds are exacerbating the crisis by buying up housing in bulk. When the properties are bundled into a single package, it’s unlikely that they will become available again to individual buyers. Investors might hold the properties for 5-10 years and when they do sell, it’s likely to be to other investors. And because this new asset class of bundled properties has tax benefits, this can also push prices up in an already hot market.
These problems are likely to be with us for many years and hedge fund purchases only make things worse. Demand is not going away. What we need are developers and builders who are willing to make modest returns by buying in depressed, already established neighborhoods where prices are still cheap. And we need more missing middle housing – think small live/work, mixed-use, or rental apartment buildings.
Read the original article here.
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