Hacker News Reader

Comment by mikeyouse | Hacker News Reader

There's no evidence at all for this.

The exotic mortgage products (e.g. reverse ARMs) have essentially disappeared, people's homes are well capitalized, lending standards are much higher than they were, there's very low levels of home equity debt, overall debt payments as a percent of household income are at very low levels.

The people waiting for a housing crash are going to wait a long time. This one chart sums it up well:

https://fred.stlouisfed.org/series/MDSP

Mortgage debt service payments as a percent of disposable income are near all-time lows and at roughly 1/2 the number of the GFC peak. Since the vast majority of home loans are fixed -- what's the mechanism for rate hikes to cause a housing crash?

View on HN

Yeah but that's an overall lowering of debt servicing as a percent of disposable income. The only part that hasn't dropped much is consumer debt.

Plus while reverse amortization might be less common, ARMs generally are still very popular and you'll see a hike in overall debt service associated with rising interest rates.

I don't know what's gonna happen with the housing market and I don't think it'll crash either but I think part of the reason is because private equity has bought a huge amount of housing - BlackRock bought what, 10-15% of the houses sold in 2020?

Consumer debt is also low; https://fred.stlouisfed.org/series/CDSP

And metrics like credit card delinquencies are at historic lows: https://fred.stlouisfed.org/series/DRCCLACBS

ARMs actually aren't very popular - fewer than 15% of new mortgages are ARM.

> BlackRock bought what, 10-15% of the houses sold in 2020?

People vastly overestimate how large players like Blackrock are. There are something like 80 million single-family homes in the US. Of these, Blackrock owns 80 thousand. If they bought every one of those homes in 2020 (they didn't) - it would represent more like 1% of homes sold that year. And of course there are millions of condos not figured into my denominator. They're huge, but way under 1% of purchases.

Naïve question, but what happens if something like 5-10% of those ARMs default and the traditional default rate increases too?

Of the 80 million single family homes in the US, how many are sold each year? For your math to work (80,000 as 1%) it would have to be 8,000,000 or 10% of the overall supply.

I can actually answer for you - roughly 820,000 single family homes were sold in 2020.

So if BlackRock bought 80,000 homes then, that'd be about 10%.

You're conflating some figures -- 820k new homes were sold[1] -- along with roughly 5.6 million existing homes[2].

[1] - https://www.housingwire.com/articles/new-home-sales-historic...

[2] - https://cdn.nar.realtor/sites/default/files/documents/ehs-01...

ah, you're right, it was 5 million existing single family, I was pulling from the census and misread. My mistake.

Good point but it works against your overall argument - the investors who buy 10-20% of houses are far less sophisticated than Blackrock and far more likely to start panic selling when their Airbnb income can’t pay their bills.

> BlackRock bought what, 10-15% of the houses sold in 2020

Is this official somewhere? I've seen it in headlines and heard it in soundbytes but did they disclose it in their 10k or something?

It's been debunked over and over again, but it's an attractive sound bite with a clear bogeyman, so of course it "sticks".

https://www.vox.com/22524829/wall-street-housing-market-blac...

It's not debunked, you're playing with stats.

The claim is that investors are buying nearly 20 percent of housing. Your refutal is that they only own 1%.

Both can be, and are, true.

"A record 18.2 percent of all home purchases were made by investors during the third quarter of 2021, according to a new report by Redfin. That was up from 16.1 percent during the second quarter of 2021 and up 11.2 percent from the third quarter of 2020."

https://www.washingtonpost.com/business/2021/12/01/buyer-dem...

I mean sure?

If you change the statement from: "Blackrock bought 10%+ of the homes in the US in 2020"

To: "Various 'investors' (including personal trusts and other tax / estate shielding entities often used for people buying their primary residence) bought 10%+ of the homes if you restrict the data to 40 large cities" then it's mostly true? But that's a different thing than was claimed..

The Redfin data that WaPo is relying on accounts for 494k homes sold in Q3 2021, of which 90k were bought by their definition of investor. But they're missing another ~1 million homes that were sold in the US during that time period outside of the cities that clearly had the most investor interest...

So a sample size of 33% isn't indicative? You might be right here, I don't know for sure.

I think the main problem is that before 2020, nobody really cared who bought what.

Starting right at the beginning of 2020, inventory vanished, and is still vanished to this day. In most major markets, investors are snapping up everything which compounds the problem. Now people are pissed. And they're doing it in the hottest, most contested markets to boot.

I live in a pretty dumpy city, and blackrock has purchased more than 20% of everything on the market in the last 2 years. Homes have almost doubled in values.

Do you understand why people are pissed at that? Pointing out they own 1% nationally does nothing to help us.

I fully appreciate why people are pissed about the housing situation - I bought my first house last year and the process was a tire fire, we ended up offering on maybe 3 or 4 other places before this one? And it wasn't even in a "top tier" city.

I'm sure there's a ton of investor interest (which in my opinion, is "downstream" of the problem, e.g. the millions-of-homes shortage is making it an attractive investment which is bringing the investor money). But again, Blackrock is a very small player in this - I can guarantee you that wealthy boomers with one or two rental properties are a much larger ownership class of investment properties than any faceless PE firm.

Blackrock owns a few tens of thousands of homes in specific cities (https://lease.invitationhomes.com/search?_ga=2.31151100.2135...), and sure, they're causing more competition and higher prices there -- but it's a nationwide problem not so easily reduced to "private equity caused".

My (very amateur) understanding of the housing issue is that its primarily a problem of supply. Since houses have been redefined from a dwelling to a financial investment, there is strong pressure on political policy to encourage asset appreciation. That means NIMBYism and corporate REITs are acting as two wealthy and highly-motivated special interest groups in favor of making new development nigh-impossible.

Or at least, so I've been lead to believe. All I know for sure is I can't by a third of the sq. ft my older sibling could 8 years ago.

I would think a lot of people might be rushing to get a mortgage before rates go up.

Whatever the reasons, home prices are ridiculously inflated right now. They’ll need to go down for first time home buyers to have a chance, so at some point there will be pressure for home prices to drop. For what it’s worth I’m in a rural part of the country and it’s not just a city problem.

The people who should not have been buying houses are now renting. Home prices in my area are higher than they were in 2008. Prices will still drop when interest rates rise - that's how it works. It's good that people will be able to keep their homes this time around, but that doesn't mean it's not a bubble.

Reply on news.ycombinator.com