A disturbing thought about real estate.

[reformist2]

If Wall Street is finding it attractive to snap up homes and package the rental income into investment vehicles that yield 2-3% per year, that is going to keep home prices artificially inflated forever, making homes pretty much unaffordable to most of the American public, pretty much forever.

Another rotten aspect of the new economy.

[CFLDem]

1. Come to the Space Coast

they're basically giving houses away down here.

[flamingdem]

2. I agree! Rents in LA have shot up 15-35% over the last

couple of years. It's artificial for sure, the landlords are jumping also in the herd asking for more.

[Nye Bevan]

3. People also complain when real estate prices drop. (nt)

[reformist2]

8. Home price appreciation is not good for young people, ergo not good at all.

Homes ought to be affordable for anyone who wants and needs to live somewhere. They shouldn't be viewed as "investment vehicles."

[KT2000]

4. the rise in rents is frightening

how are low wage earners going to find housing when they require the rent be no more than 1/3 of income. Unfortunately, real estate is our homes and it looks like a bunch of people are going to be pushed into the streets.

[laundry_queen]

5. I know this has been talked about before here, but i thought I'd do a quick recap

About a year or so ago, every other week there seemed to be some new article or tv news item come out about the 'benefits of renting' and how all these people were preferring to rent and how home ownership just wasn't a good investment anymore. It was so coordinated, and over the top renting=good/owning=bad that some of us here were pretty certain the 1%ers were trying to convince everyone that it was pointless to buy just so they could snap up homes on the cheap. I've seen nothing in the last year to convince me that wasn't the plan.

[raccoon]

6. I like the way you think! nt

[sendero]

9. Yes..

.... and anyone that thinks they can come out ahead by renting is not very financially savvy. I understand that people are scared of buying after what happened but that is not likely to happen again.

It's really as simple as this: when you rent, you pay all the costs you would have paid if you bought, plus a profit for the landlord.

Lastly, I'm not so sure this is going to work out all that well for the hedge funds, managing rental property is not trivial and not easily outsourced. If the person who decides who is going to be the tenant has no real financial stake in the selection, they are going to make a lot of costly mistakes. Properties that are allowed to "run down" command less and less rent in a death spiral.

Large institutions have not done well at this in the past and I don't see how anything has changed.

[bemildred]

7. The housing market is inflated (bad) and must eventually go bust.

Well, what is one to do? How to keep those inflated income streams flowing?
Then somebody notices that rent is even higher than a mortgage.
So then they take all the properties back and rent them out.

Your assert has declined in value, but you still have the revenue stream, you've even enhanced it.
Also you can create new rackets in the property management business you set up to manage the rentals, take over the HOAs, and so on.