Demand and lack of new supply. After the housing bubble in 2008 there was a major contraction of new home construction. It has been slowly recovering ever since but is still off the highs by quite a bit. So the combination of very low rates of new construction for nearly a decade and a current rate of new construction that is still depressed.
The notion that private equity is some how manipulating home prices independent of true supply and demand dynamics is largely a lie being told by people who’s politics fit well with that narrative.
Wether a corporation owns the home and rents it out or the home is owner occupied their is still someone living there. That doesn’t effect the supply demand dynamics. Those families have to live somewhere.
It may seem vaguely unfair that they have a possible advantage being an all cash buyer but that isn’t what is driving up prices. If they were buying places and not renting them that would be a different story but that isn’t what is going on here.
PE enters markets only when there is a lack of supply. Don't take my word for it. Read their prospectuses. They are completely upfront about entering markets only when the local government has constructed impenetrable barriers to entry.
Of course, they go where they can make a good return. But they’re new to this market and increase the demand side of things. They can move much faster than individual home buyers. Real estate is constrained by regulations and it does get I the way of supply. I’m pretty sure My building couldn’t be built in our “historic district” today
Why were new construction rates depressed? It seems bad for the structure of our housing economy that we've had such a bull run in real estate over the past decade and the supply couldn't catch up and profit off of it. Too little too late shouldn't have been possible according to free market theory, but here we are with far too little much too late. I wonder what failed? Zoning changes in the last 10 years? CEQA and similar abuses becoming more prolific?
The crash drove home builders to bankruptcy and construction isn’t generally a trade to can just get into without some training and experience. I’m sure government over regulation doesn’t help but outside markets like SanFrancisco where they are hostile to new development I doubt it is a primary factor in prices.
The notion that private equity is some how manipulating home prices independent of true supply and demand dynamics is largely a lie being told by people who’s politics fit well with that narrative.
https://fred.stlouisfed.org/series/HOUST