American investment banks are purchasing single-family homes in an effort to profit upon skyrocketing rent and property values.
As The Daily Wire previously reported, CoreLogic’s Single-Family Rent Index from April showed a “national rent increase of 5.3% year over year, up from a 2.4% year-over-year increase in April 2020.” The group noticed that “as demand for more space and outdoor amenities remains, detached rentals, in particular, are experiencing accelerated growth with a 7.9% year-over-year increase in April, compared to growth of 2.2% annually for attached rentals.”
A more recent report from the National Association of Realtors explained that average American home prices in June 2021 reached $363,300 — a 23.4% increase over the average of $294,400 in June 2020.
As CNN Business writer Hanna Ziady summarized, rapidly rising rent and property values are drawing Wall Street investment banks to the housing market:
According to John Burns Real Estate Consulting, in the first three months of this year, nearly a quarter of all homes sold in the United States were going to investors. That’s a broad umbrella that covers everything from mega institutions to individuals buying vacation homes, but BlackRock, JPMorgan Chase and Goldman Sachs were among the big-name buyers.
Institutional investors still own only about 2% of all single-family rentals in the United States, or roughly 300,000 homes, according to John Burns research director Rick Palacios.
The same trend is occurring in England, where American companies are likewise purchasing residential real estate:
Institutions poured a record £3.7 billion ($5 billion) into the UK build-to-rent sector in 2020, almost a third of which came from first-time investors, according to real estate consultants Knight Frank. This year’s number is likely to come in even higher, with inflows in the first three months of the year alone reaching almost £1.3 billion ($1.8 billion) — a 16% increase on the same period last year.
One of the institutional investors actively seeking single-family housing opportunities is Goldman Sachs, which earlier this year bought 900 single-family houses in the northwest of England, and is now partnering with developers to build more homes.
Mortgage-backed securities currently represent $40 billion of the Federal Reserve’s $120 billion monthly asset purchases, which are meant to stimulate economic activity following COVID-19 and the lockdown-induced recession. Likewise, the central bank’s near-zero target for the federal funds rate — the interest rate at which private banks can borrow from one another overnight — causes other interest rates in the economy to drop, including those for mortgages.
As lawmakers pointed out to Fed Chair Jerome Powell at a recent hearing, the central bank’s monetary policies decrease the cost for investors and homebuyers to purchase real estate, leading to higher prices.
Last week, China — which now encourages couples to have up to three children — announced regulations upon its real estate sector to promote affordability for young families. Chinese President Xi Jinping believes that “housing is for living in and not for speculation.”