Americans love to hate on “BIG!” Big tobacco, big pharma, big oil, big food, and my own personal bête noire – “big bank!”
These guys use their political clout and capital to crowd out the little guys with sheer muscle and regulatory capture – where they push for regulations that they can afford to comply with, but the little guys can’t.
I experienced this firsthand after 2008 when the big banks pushed through regulations that made it far harder for small mortgage companies to compete.
I also witnessed it very clearly on a motorcycle trip through northern California a few years ago when “big weed” took over all the marijuana-growing operations and pushed out the little guys who were very upset (because they could no longer make an honest living selling weed illegally).
Anyway, the latest target is “Big Investor” or “Big Single-Family Residential Real Estate Investor” to be more specific.
The National Real Estate Post (NREP) recently posted this short video: A Wake-Up Call for Realtors and Lenders. In that video, with much horror, they explained how investors made up a full 28% of all single-family residence purchases Q4 of last year.
They then pointed out how those evil investors overpay for properties, drive up prices, crowd out low-income and first-time buyers, and don’t care about local communities.
What they fail to point out though is how much of the above-referenced 28% of purchases were by big investors or by small investors (who remain very active), and what kind of homes were the big guys buying?
Anyway – enter the Wall Street Journal – the best friend of all things “big” – with this article: The Latest Plan to Exacerbate California’s Real Estate Crisis.
The article discusses two legislative proposals in CA that would limit or cut off the ability of big institutional investors to buy single-family homes.
Black Rock is the face of these big investors, but they come in all forms, such as private equity funds, hedge funds, and REITs.
The WSJ points out how the big investors only own a measly 2% of all single-family homes in CA, and only 5% nationally – so they’re hardly dominating the market.
In addition, they often buy up properties nobody else wants and use their capital to refurbish them.
Big Guys Supplying Rental Homes
And finally, these big guys supply an enormous chunk of single-family homes for the huge number of renters who either don’t want to buy or cannot afford to buy.
What is most comical or ironic though is that the very legislators who want to fix California’s housing problem by shutting out buyers are the same ones who are causing the problem by making it so hard to build new homes – with all of their green mandates, excessively demanding building codes, high development fees, and various other regulations of every type.
If those legislators all re-settled in Antarctica for twenty years with no access to the outside world, they would do far more for the housing market than shutting out investors ever would.
Every Nervous Homebuyer Needs This Data
Here is one more enormous plus from “big investor” housing demand: every agent should be sharing this data with nervous homebuyers!
If these guys (with all of their cash, PhD analysts, and ability to invest in anything, anywhere) thought the market was going to crash, would they be buying houses?
Probably not…
So, “BIG” is not always bad.
This might be me remembering too that it is those “evil” big banks that provide much of the capital that the mortgage industry so badly needs as well (but I’ll never admit it; it’s too fun and too easy to hate on “big”).
