This isn't disrupting an industry, this is disrupting people's lives, and for what? What good is supposed to come from Zillow (et. al.) oligopolizing the housing market, and driving up prices like this?
To my knowledge, there have been no significant changes to the definition of M2 in 2020. The increase there is real. The M2 definition change mentioned in the article was on Jan 1, 1973.
>> The government, Fed and Treasury, basically printed up about $5 trillion of new cash and treasury debt -- these are largely perfect substitutes so the composition doesn't really matter.
I take this to mean, "interest rates are around zero, and the debt is going to be rolled over when it comes due." An I guess Treasury mostly issues short-term debt, and the Fed is holding short-term rates down, so if we assume new debt issuance has ~no interest-rate impact, fiscal effects seem to have more relevance to inflation than monetary ones:
- Monetary interventions mostly trade "money-like" things for other "money-like" things, both sides denominated in dollars. Maybe the actual dollars involved are "created", but the bonds bought are effectively retired, so no real net effect.
- Fiscal interventions involve creation of "money like" things and trading them for goods and services, bidding up prices.
Interest rate markets look like they're expecting some give in the short term, so maybe this will stop being quite as true, but it looks like those markets aren't predicting anything like "normalisation" over the longer term.
1: https://johnhcochrane.blogspot.com/2021/10/transitory-inflat...
Prices in my area are up 75ish % since 2018. Rent prices about 50.
The reason why the government has done nothing to fix it is because
1. The median voter is a homeowner and WANTS homes to be unaffordable so their investment goes up.
2. The median non-homeowner does not understand basic supply and demand and does not understand that the lack of housing is the main driver of high home prices, so they complain about red herrings like Zillow buying up houses instead of pushing the government loosen zoning restrictions on multifamily housing.
You fall into the latter category, which means YOU are part of the problem. You complain about the government not doing anything to fix the housing problem but people like you are literally the reason why it doesn't get fixed.
Zillow isn't the only big buyer of homes, and not all buyers are doing it to flip. The problem is renting in general. I would welcome regulations that bar any institution or individual from owning more than a handful of rental properties, and some kind of incentive for mortgage lenders to de-emphasize down-payments in lending.
Hell, I'd like to hear a great debate on the ethics of renting-without-equity, period. Perhaps all residential units should offer equity in the living space over time, even apartments. Eliminate the renter class altogether by bringing everyone into the ownership class.
You don't understand that making operating rentals harder and more expensive will cause rents to go up. So yes, there is a very large group of people who don't understand supply and demand and you are part of that group.
> Hell, I'd like to hear a great debate on the ethics of renting-without-equity, period.
If you force people to receive $500 in equity for every moment they rent, then rents will go up by $500 / month. This is bad for the people who cannot afford to pay that $500, or for people who would rather invest that $500 in the stock market or whatever. If you wave the regulatory wand and demand that X must happen, then what you are really demanding is that everyone must pay for X, whether or not they want to. Not that everybody will magically get X for free.
There are options other than forcing people to receive equity. e.g. A public-ownership rental option: https://www.theatlantic.com/ideas/archive/2021/03/why-its-be...
Given the quality of debate and/or fantastical thinking that I see in a lot of online forums, I'd be forced to wager that a pretty wide swath of people who debate rent (or other economic) topics online appear to not understand supply and demand. Whether or not renters on average do or do not, I can't say.
The burden of the proof is on Zillow, they are the multibillion behemoth
If enough angry people are energized then the highest bid from Zillow or BlackRock or BlackStone...won't mean anything.
Matter of fact it can be reversed.
Public opinion is the ultimate free market and it works via the allocation of love and hatred by the populace.
Landlords gets a lot of hate as it is, think when the landlord is a multi-billion dollar company.
For all those who want the government to step in and reduce housing prices via regulation, consider that same government has interfered with the health care industry and the education industry for the last 50 years attempting to lower prices. The consequences are the opposite.
The goal isn’t necessarily about reducing home prices, it’s about increasing home ownership. Those shouldn’t be conflated.
So if that same context was applied to evaluating education, it has worked as the overall educational attainment has increased. Whether the cost is worth that increase can certainly be debated.
My niece, at 18, was thrilled to move into her own place. She prioritized having her own space as a mark of independence and adulthood despite it being more economical to live at home. Renting-without-equity let her do this because she did not have to pay to build equity in a space. Instead, she could build "equity" in herself as an adult.
Every regulation, restriction, and string-attached pushes out someone at the margin. So, yeah, while some approaches look ethical what is not seen is those people on the fringe who lose something as a consequence of those "ethics".
But Paul Davis, First of His Name, you cry, that means someone is still buying those ex-Boomer family homes!
Why yes, yes it does. But those retiring boomers, in great numbers and armed with (relative) boatloads of cash, are moving to places that they would not have settled in before reaching this stage of life. 20-30 years ago, their money would have sloshed around inside the places they already lived, as they perhaps needed 1 more or 1 less bedroom. [0]
But now, they are on the move. Bend, Santa Fe, Bellingham, Ithaca ... many, many communities seeing huge influxes of cash buyers that would not have happened before.
I'm sure there are many other forces at work in today's crazy residential real estate market, some of them possibly larger/more important. But I think that this time period, right in the middle of the Boomer retirement wave, is also affected by this too.
Disclaimer: I resemble the above remarks.
[0] EDIT: also, as noted by others here, some of the buyers of those homes are not in any way "other people buying family homes" but investment/financial service corporations.
I sold my home in 2019. At the time there was already a frenzy, multiple bidders, buying on day one. Just like today. The guy who bought my house went 30% over asking. I wasn't willing to be rushed, so just sold and didn't buy. I'm in no hurry to buy - I've been enjoying traveling the country. But I don't enjoy the gouging I've been taking on rent, admittedly.
Secondly, there are no zoning problems where I live. The problem is exactly Blackrock buying tens of homes per week. That and migration.
A progressive property tax, or other limits on investment homes would alleviate the problems I've seen firsthand.
Cool story, but what does that have to do the root causes of rising home prices? What exactly are you trying to argue here?
> or other limits on investment homes
Limits on investment homes makes renting more expensive, the same way limiting the production of cars would make cars more expensive. You are literally advocating shifting the supply curve further to the right. Every post you make further proves my point about people not understanding basic supply and demand.
Let's try a small example.
In a city there are ten houses. Five are vacant, let's call them new construction.
Five people are moving to the area.
Everything sounds good, right?
Blackrock buys 3 of the homes. Now 5 people have to fight over 2 houses. This drives housing price up as they bid with each other.
The remaining 3 losers are forced to rent. Blackrock can now charge more money because a) house prices went up, and b) there are no other places to live.
To be clear, this is talking about what's happening in -my- area. And based off your Nimbyism comments, I can assure you that it's not the same as your area.
I get that no one has a God given right to home ownership, but we've made a deal with the devil where home equity and housing appreciation are major stores of wealth for the middle class. Letting the investor class corner this market feels like kicking out the ladder for anyone not already on it.
That's true of every item on the free market. It's why markets exist.
Note that air is essential to life, but nobody is selling air. There's no marketplace for free software, either.
And then there's businesses that do sell bottled air and people that do contract work or paid support on free software.
They're selling compressed air. That's added value.
> and people that do contract work or paid support on free software
They're being paid for a service, not the software.
But hey, I'm an enterprising man. Send me $100 and I'll send you a package with air in it and instructions for downloading free software.
Would you feel the same way if you or your SO had some awful disease, and someone was buying all the medication and selling it at a price out of your reach? 'Sorry honey, we can't afford medicine, that's the market working lol.'
And before the argument starts 'well, someone else would just make more...' that takes a lot of lead time, like houses do. And by then, aforementioned medicine buyer has made enough profit to buy even more.
I mean, it happened with TP or all things. There was enough for everyone, until people got greedy with it. Happens with gasoline yearly.
Seems people with houses don't care because it's good for them. Hell, I made a lot of money in all of this even.
Please understand I'm not arguing from a position of need. I don't need a house, and if I did, I'd just buy one.
I'm arguing for people like my brother, who worked hard their whole life and keep getting priced out by asshole investors.
In summary, I only ask you attempt to look at problems from a lens different than the one people like you and I currently look at things. It's easier when you know and love people affected, admittedly.
> Would you feel the same way if you or your SO had some awful disease, and someone was buying all the medication and selling it at a price out of your reach?
What is your proposed mechanism for deciding who gets it and who doesn't?
There are some items that are essential enough where society has determined the market is not the appropriate mechanism to manage supply and demand. Not how we regulate clean air/water supply rather than leave it up to the market and how citizens in some areas have rejected claims by corporations to market previously free resources.
There are some who would say housing falls into this "essential" category and thus should not be entirely a free-market (I'm not sure I'm one of them, but think it's important to acknowledge the position in good faith).
> but we've made a deal with the devil where home equity and housing appreciation are major stores of wealth for the middle class. Letting the investor class corner this market feels like kicking out the ladder for anyone not already on it.
But it's not the "investor class" that's cornering the market, it's current homeowners. Housing prices are going up due to a limited supply, something that many current homeowners actively fight for
It can be both. One keeps supply from entering the market, the other buys out the supply that does enter the market.
Long term, yes, we need to build more houses. Americans should also probably adjust their expectations and zoning laws to expect less detached single-family houses. We also probably need to stop treating residential property as an investment, however we go about doing that.
The usual way the government accomplishes this in the housing market is by making it difficult or impossible to build more housing.
This is true for a subset of regulated monopolies, but there is also the concept of a natural monopoly which does not require any governmental intervention
> many would consider
I don't. Many of the current top ones replaced the previous top ones. Not many even remember AOL.
And since a monopoly is just “certain business practices” that unfairly constrain competition, your definition seems to be a difference without a distinction.
[1] Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911)
See "Titan" by Chernow.
But in any event the price at trial is not necessarily indicative of unfair anti-competitive business practices. The trial was not necessarily about the current practices at the time of the trial, but broke the business practices into three distinct periods dating back to 1870.
I think a better question for you to ask yourself is “why did the court determine they were acting in a monopolistic manner?”
I’d suggest reading the previously referenced court ruling to get your answer.
Rockefeller was convicted of being rich. That's the bottom line.
Here is a part of the majority court decision written by Chief Justice White:
"constituted a combination in violation of the first section and an attempt to create a monopoly or to monopolize"
>"entered into agreements with, various persons, firms, corporations, and limited partnerships engaged in purchasing, shipping, refining, and selling petroleum and its products among the various states, for the purpose of fixing the price of crude and refined oil and the products thereof, limiting the production thereof, and controlling the transportation therein, and thereby restraining trade and commerce among the several states, and monopolizing the said commerce"
If actual price-fixing to monopolize commerce isn't part of your unique definition of a monopoly, I don't know what else to tell you. It's pretty hard to price fix without a monopoly, but as we already discussed they were able to do so because they controlled over 90% of refineries at the time. (And before you jump in again - erroneously - about their price during the trial, this monopoly charge was related to actions decades earlier). But it's pretty obvious from your relentless rules-lawyering/wordsmithing that either you aren't responding in good faith or don't actually have the ability/willingness to read evidence objectively.
Cognitive dissonance is a hell of a drug.
>> At the time of the divestiture, the oil industry was becoming competitive because it was moving into Kansas, Oklahoma, Texas, Louisiana and California—states where Standard Oil didn’t have much power. The price of petroleum was actually falling in the years before the case, because these new fields were pumping so much crude. The breakup had no measurable effect on oil production, crude-oil prices or refined-product prices.
(The article does say that antitrust actions were necessary to make cigarettes affordable, though.)
For a rather less charitable take, [2] from the "Competitive Enterprise Institute" says,
>> Standard Oil Co. of New Jersey v. United States had a defendant that was cutting prices while increasing output. The case also lacked evidence of either predatory pricing or consumer harm.
After this quick bullet-point summary, there's more content below with references to other academic sources, page 2 is pretty interesting.
> many would consider social media companies to be natural monopolies in the current context
They have positive returns to scale, but even this phrasing ("social media companies") deflates the argument -- Facebook competes with Twitter competes with TikTok competes with Reddit competes with Youtube etc. They're big enough to exert market power, but
- Some of them seem to dislike using that power (to the horror of authoritarians in many governments who want to co-opt it), and
- If they abuse that power to the detriment of users (raising prices too high, banning enough communities) users will go elsewhere.
1: https://www.brookings.edu/opinions/if-it-aint-broke-dont-bre...
2: https://assets.realclear.com/files/2021/01/1755_antitrust.pd...
For the record, with my limited understanding I don’t think “social media companies” are monopolies because they do not run afoul of general consumer prices because their products are typically free. They may deserve to be regulated under a different framework, but they don’t seem to fit the anti-trust paradigm. I brought them up because others, including the authors of the link I provided, consider them natural monopolies
I guess I'm less convinced of judicial infallibility, but I'll grant you it anyway. Mostly I don't think the important question here is the legal standard (which is of course what the court is interested in) than the question of whether the law is achieving its intent. If the law says that a company that is lowering prices and losing market share is a monopoly that should be broken up, the law isn't really reflecting mainstream thought about antitrust -- that market concentration is self-perpetuating and harms consumers.
Here’s why I think you’re previous comment misses the mark: the court ruling was not about whether the company was monopolistic at the time of divestment (1911), the ruling was against business practices that occurred previously, dating back to 1870. It’s possible those practices were unfairly anti-competitive while also no longer creating a monopoly decades later due to other factors.
Gates was convicted of giving away Explorer for free. Nobody managed to show that harmed consumers.
Like Rockefeller, Bill Gates was convicted of being rich.
Here's what MSFT was actually taken to trial for:
"monopoly position in the market for operating systems designed to run on Intel-compatible personal computers ("PCs"). Specifically, the plaintiffs contend that Microsoft violated § 2 of the Sherman Act by engaging in a series of exclusionary, anticompetitive, and predatory acts to maintain its monopoly power. "
Not "for Gates being rich." Now, his wealth may have put the spotlight on him, but that doesn't negate the court decision on his actions. I can lament that the only reason I was pulled over was because I drive a red Ferrari, but that doesn't mean that my speeding wasn't illegal.
> red Ferrari
Selective enforcement is a real thing, and why the offense written on the ticket is not always the real offense.
"was in restraint of trade and amounted to the creation of an unlawful monopoly."
You can't create more land in the middle of San Francisco, so the land-owners of the land in the middle of San Francisco have a natural monopoly on the land in the middle of San Francisco.
"Desirable" locations is a completely subjective term.
> You can't create more land in the middle of San Francisco
Yes, you can. We call them skyscrapers.
Alright, use "valuable" then. Value is derived from people's desire to purchase the land, which means valuable land is equivalent to desirable land.
> Yes, you can. We call them skyscrapers.
Skyscrapers aren't land.
I'm not entirely sure you're conversing in good faith but I'll do my best to assume you are. Land is a natural monopoly, and the most classic of all. For example, the land surrounding Central Park in New York City is of limited supply. If you want land which borders, say, the west side of Central Park, then there is even less land available.
If someone owns all of the land that borders the west side of Central Park, then no one else can use that land unless they are permitted to by the owner. This means that the owner has a natural monopoly over all land that borders the west side of Central Park. You cannot create more land that borders the west side of Central Park.
Now, if you wanted to live in a house or apartment that borders the west side of Central Park, your only option is to negotiate with the land-owner. They may sell you the land, or rent the land to you (or rent you an apartment or house on that land). If living on the west side of Central Park is something desirable to you, then the land-owner can charge you the absolute maximum price you are willing to pay for living there. You have no alternative, except to not pay at all. If you are willing to pay $1000 a week to live on the west side of Central Park, the land-owner can charge $1000 a week. It is entirely independent of the labour and costs of the land-owner, and entirely based on your willingness to pay.
Any solution requires that buying an existing house is no longer directly profitable. However, as originally posted, that goes against the goal of having houses increase in value, a goal which too many voters share.
Put simply, to make houses affordable, you have to drop (or stabilize) prices. If prices are now stable, then your Blackrock problem just goes away.
There are a few ideas that preference individuals over Blackrock (rules about how many houses you can own, tax rules that preference primary residences, etc...). Some of these can help, but still, if prices keep going up, then new residents won't be able to buy, and you still have the same disaster.
EDIT: I am partial to a ludicrous capital gains tax on property (like 70%). However, it's possible that will harm liquidity, so who knows!
In fact, that sounds like misplaced blame when in the exact same post you mention these things:
1. The median voter is a homeowner
2. The homeowner wants the price of their house to increase
3. Therefore it is in their interest to keep housing unaffordable
4. Therefore they continue voting for the people who facilitate it, and don't vote for the people who want to change it.
5. All because their house is not a home, but an investment
In your mind, a person who is fed up of being priced out of a place to live is part of the problem? It doesn't stack up.
At least in the US, home equity is the largest single asset class for most people.[1] I agree with most is what you said, but it seems fairly predictable that people would try to protect the biggest egg inn their nest. Whether or not it’s good policy to combine supporting that is another matter.
[1] https://www.census.gov/library/stories/2020/11/gaps-in-wealt...
If you're just happily living in a house you own, it's nice that the theoretical price is going up, but it's of limited actual benefit to you. It only has a real impact when you sell - and only has a benefit if the house you want to buy has appreciated less than the one you're selling to pay for it.
Houses falling in value is bad - people are trapped where they are by negative equity, which creates inefficiencies (can't move to a better paying job, as can't sell the house you're in).
The only thing I think is universally bad about house prices rising (along with low interest rates) is that it allows people to re-mortgage their homes (or choose not to pay down capital), to buy another home to rent as an investment (either directly, or through an investment). This creates a feedback loop, creating a class of owners and trapped renters.
I'd have thought the solution here would be a healthy dose of taxation on rental income.
The whole world isn't San Francisco. Where I live in Australia, there is no physical lack of roofs to house everybody who wants one. Our "shortage" is entirely political and can be legislated away overnight if the will were there. The problem is and always has been rooted in the words "investment property."
In Australia we have a housing bubble, but the problem is woven very deep. Our tax system favours property investments. Our top tax rate (45%) kicks in at extremely low levels of income compared to globally ($180,000 AUD which is around $135,000 USD). The system provides all kinds of tax deductions to investment property owners, and ways of making paper losses to offset income tax.
Much of our economic activity is banking, retail and construction. Much of which is fuelled by the churn in property with ever increasing prices. This economic cycle kept Australia out of recession until Covid hit. Now that the average house is over $500,000 AUD, we have large swaths of the younger population leveraged to their eyeballs in debt at a 2% interest rate. If housing prices fall or interest rates rise there will be a collapse, and a good chance of an extended recession we have avoided.
The best case is they slowly the market down, we have a moderate rate of inflation which allows the real value of houses to drop. At the same time reduce the tax benefits to property investment.
Unfortunately this won't happen. The political class knows that the median voter is a home owner, and its in their interests for housing prices to keep rising. They are just hoping that it can keep going until after they are finished. Totally not jaded about not being able to afford a house in my late 30s due to being wiped out in the 2008 GFC and then starting a family.
In Perth, when the government grants were being handed out, at some stage there was hardly a single property less than 400k, now in some of the less desireable areas you can get detatched houses down to as low as 200k.
Just this week, the bank stress test on mortgage lending increases from 2.5% to 3% tolerance to rate increase, lessening the amount that can be borrowed.
It's all over the place, but as y say the tax system has created the concept where a dwelling is an investment and it skews the whole market.
Renting looks pretty attractive at times, but the nature of tenancy agreements in Australia is 6 to 12 months terms with invasive property inspections on a regular basis, nothing like the european model with 10 year terms and decorate at will.
This also drives a desire for home ownership for families as if they don't want to pay for private schools then there is competition to get into suburbs with the better government schools, and even without this they want sme long term certainty such that if they move suburbs they won't have to change childrens schools.
Immigration is an interesting variable. I'm an immigrant myself, but I'm also coming to question the wisdom of shipping in a cheeky hundred thousand people every year. It does seem like a bid to keep a scam economy running more than anything else. The supposed dearth of skilled employees is most likely another politically manufactured "shortage."
Of course, there's no reason why we should mistreat the native population and then depend on foreigners for everything from auto repair and electricians to tech workers and scientists. We should actually care about our domestic population and about our own working class.
But if you are a business and you want to hire a skilled worker, you do really rely on the foreign labor market quite a bit.
But that tautology is not very illuminating. If you look at skilled wages in the U.S., they are really high. Compare them to Europe. They are high enough that skilled workers all over the world come here - the U.S. outbids the entire planet for skilled workers, which tells me more about our inability to produce skilled workers domestically rather than anything else.
It's like we've turned our back on our school system, abandoning it to ineffective utopians that are busy cancelling advanced placement courses while insisting that it's unfair to track people into trade schools, and instead we just import workers from countries with more functional educational and trade school systems.
Go to any top-tier graduate program in STEM, and the majority of grad students, post-docs, and professors have been born overseas. Take a look at how little an American college graduate knows compared to a German college graduate in the same major. Just a huge competency gap for the average graduate. Now compare what a "college prep" high school graduate knows in the U.S. with what a graduate of a gymnasium knows in Europe. Enormous difference. Go and look at the local auto mechanics, electricians, carpenters in your area and count how many have been born overseas. Because where would you learn those skills as an American? You have to get lucky, there is no system in place to route students towards learning these skills, they have to pick them up on their own, after going through high school -- where they learn virtually nothing -- and at their own expense.
I think part of the argument (and where your home building analogy may not be quite appropriate past the superficial level) is that much of the work is done using U.S. tax dollars, meaning Americans are funding a system that simultaneously depresses their own wages.
>Go and look at the local auto mechanics, electricians, carpenters in your area and count how many have been born overseas. Because where would you learn those skills as an American?
I've been lucky enough to be able to live multiple culturally distinct areas in the U.S. and found this to be very different depending on location. In some areas, like the Rust Belt, that have a history of blue-collar work, I don't know that I saw many non-native workers in the skilled trades (albeit there was probably still a higher percentage in the unskilled labor market). These areas also have a larger union presence and with that comes apprenticeship programs where they aren't forced to learn those skills at their own expense; in fact, they're paid to do so. Other areas that have a larger immigrant population, I'd concede your point that most of the skilled trades were immigrants but they didn't seem to have the same systems in place. It's possible your conclusions might be an artifact of sampling bias. But I would also agree that, culturally, blue-collar career tracks may be disparaged in the U.S. to the point where fewer Americans are willing to pursue them.
Are you saying that the US is the only country that can’t produce enough skilled workers and everyone else overproduces?
To me it means the opposite: demand is so large here that it has outstripped local supply
Huh? That's not that low. In the Netherlands the highest bracket, 49.5%, kicks in at ~€68k EUR (~$78k USD).
What is the cause of the shortage? What legislation would make the problem go away overnight?
TIL that pouring a truckload of gasoline on a brushfire has nothing to do with why the forest is currently burning out of control.
It's been dropped down the memory hole but that's what the Truman Administration did after WWII. But with single family homes.
No it isn't. Real estate companies buying up homes literally rounds to 0% of the market. Reflexively blaming everything on evil big corporations is an intellectually lazy copout.
Housing prices are up because of nimby politics that prevent new construction and collapsing interest rates. Zillow is a trivial insignificant minnow has absolutely no impact on broader market.
Even if Zillow were large enough to move the market, all they are doing is flipping houses, not hoarding them, so they have zero net impact on supply and demand (every buy is paired with a sell).
This has the same effect of complete removal from the supply-side as the home is no longer considered part of the 'for-sale' pool.
This leads to artificially inflated prices for homes that are actually for sale, since rental properties are removed from that pool.
Most of those LLCs and LLPs will be smaller investors. I would not think of buying a rental an not using an LLC - even if it would be for just one rental. I'm not sure the kind of entity that owns a property matters all that much. For $150 plus a little extra paperwork, a LLC really does de-risk the rental business.
No such corporate buyers exist in my market, but prices have gone up a similar amount. The cause of recent price increases is likely far more complicated.
If Zillow or a similar company is able to disrupt the realtor and mortgage industry, there is potential for massive savings for both buyers and sellers. Right now middle men skim close to 10% off each transaction.
Or far simpler: not enough homes to satisfy demand.
It’s 5% at the most in most markets right now, with lost of options for even lower commission or flat rate listings.
I’m not at all sure that Zillow buying a few hundred homes out of the many thousands of listings was a primary contributor.
Phoenix has historically had huge booms when people start to leave California, and many other markets without any Zillow purchases at all are experiencing huge growth.
Zillow is currently looking to offload seven thousand homes in my area, not a few hundred.
Did anything else notable happen in the last year that could have contributed? What city is this?
I hope we get to the point where the top 10% of individuals own 95% of wealth/assets in the next decade.
Housing market seems to be following the same trend.
The same good that is supposed to come from essentially every action by a for-profit corporation. How you get there through monopolization/oligopolization is pretty obvious.