Pulling Up the Ladder on Housing

A story of great significance broke on the front pages of The New York Times and The Wall Street Journal last week. It had nothing to do with Donald Trump

Thursday, in: “The Future of Housing Rises in Phoenix,” Ryan Dezember and Peter Rudegeair reported in the WSJ, “high-tech flippers such as Zillow are using algorithms to reshape the housing market.” Their story began: “Armed with loads of cash and the latest in machine learning, investors are reshaping the $26 trillion market for US residential real estate, starting in Phoenix, the petri dish for America’s housing experiments.”

Friday, in the NYT: “As Investors Flip Markets, Home Buyers Are Reeling,” Ben Casselman and Conor Dougherty, added some facts. Investors bought one out of five starter homes that were sold last year, meaning those in the lower third of the market. In the most frenzied markets, they wrote, “investors bought close half of the most affordable homes sold last year, and as much as a quarter of all single-family homes.”

Friday, too, in the WSJ, Laura Kusisto followed up with: “Investors Buy Homes at Unparalleled Rate.” Big private-equity firms, real estate speculators and others had a powerful advantage over families with seeking a home to live in, she wrote: they often offer to pay all cash.  “Their interest poses a challenge for millennials and other first-time buyers.”

Starter homes apparently have become an asset class for Silicon Valley startups and institutional investors.  Housing policy issues – not just programmatic flipping but zoning and rent control as well – are on their way to the top of America’s domestic political agenda.

Economic Principals is traveling and unable to do more than point out that  the widely acknowledged problem of growing inequality last week acquired an important new focal point.

Back next week.



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