> The houses are purchased by hedge funds and other smaller investors.
The hedge fund thing is way overblown. Even if they buy up homes in hot markets, their incentive is still going to be to sell them if/when the market cools. Corporations do not enjoy the same tax incentives as homeowners in this country, and the risks/costs to rent out older homes just doesn't pen out for non-local investors. If PE wants to get into housing, it's such a better deal for them to just build apartments.
Currently less than a percent of homes are owned by private equity. And the majority of those are owned for the purpose of turning around and selling them, like Home Partners.
(Zillow also tried buying up homes for the purpose of arbitrage and it ended up blowing up in their face).
I believe you are correct on the hedge fund point; I was confusing it with something else that's related but different (I recall investing in a platform that made some of its profit from financing the construction of homes). The effects that I worry about still seem to be actualized by the "smaller investors" I mentioned, such as the head of a household being able to afford to purchase another home as a rental or a replacement as they rent out their old home.
I suspect that people conflate "buying a house as an investment" with "investors bought a house", which is leading to the incorrect idea that hedge funds or private equity are somehow cornering the market.
I think the reality is that the main component of investor pressure is from people who hold onto an overly large/well placed home far past the point of utility, because they want to sell as late as possible and maximize their return. Follow that with small-time landlords, and then finally actual explicit investors buying homes as some kind of commodity. A lot of the dysfunction of capitalism (so-called "late stage capitalism") is induced by people trying to outsmart the market, time the market, etc. when they really don't have the knowledge or information to play such games.
The hedge fund thing is way overblown. Even if they buy up homes in hot markets, their incentive is still going to be to sell them if/when the market cools. Corporations do not enjoy the same tax incentives as homeowners in this country, and the risks/costs to rent out older homes just doesn't pen out for non-local investors. If PE wants to get into housing, it's such a better deal for them to just build apartments.
Currently less than a percent of homes are owned by private equity. And the majority of those are owned for the purpose of turning around and selling them, like Home Partners.
(Zillow also tried buying up homes for the purpose of arbitrage and it ended up blowing up in their face).