March 4, 2021
New Orleans One story after another in the mainstream media is now focusing on the shortage of homes for sale in city after city. The curious American dream of homeownership is another endangered species it seems, while at the same time the corporate and private equity grip on rental properties as cash cows with manageable risk is accelerating. Families may not be able to buy affordable houses, but the big whoops is sweeping them up still in huge tranches.
The reasons or rationales for the shortage of homes for sale are numerous. Some point to the delays still lingering from the 2007-2008 housing bubble collapse. The pandemic is a popular culprit. Older home owners, normally a source of homes for sale as they transition to smaller properties or other forms of care are hanging on in fear of nursing home morbidity and resistance to strangers, including real estate agents, tramping through their houses. Others are staying put because they are unsure whether more remote work is here to stay, or this is all temporary, but either way they are standing pat. The moratorium on foreclosures and increased forbearance also may mean that houses even with nonperforming loans are also not coming on the market.
Less often cited, but invariably a huge factor, is the capture of more than five million homes by bottom feeders and private equity after the Great Recession and, after a splash of paint and minor repairs, repurposed as rentals. These companies have made billions, spun off their creations, and now are even consolidating. This area of investment is now seen as so lucrative that recent reports saw a merger of sorts between Roofstock, a rental agency, and a giant commercial real estate company to take the phenomenon internationally.
Needless to say, the shortage of affordable homes, available to low-and-moderate, working class families is even more intense. Companies with various intentions are trying to see if they can reverse the trend and flip rentals into home ownership, even though some of these schemes are flatly predatory.
This is a situation that is way too close to home. We see prices hitting ridiculous levels in our own neighborhood in New Orleans, already under intense gentrification pressure. Simple shotgun doubles are going for $5 – 600,000, the same houses that fifteen years ago before Katrina would have raised eyebrows with even a $150,000 price tag. In Little Rock, friends put their house up for sale and had a half-dozen offers within hours, including one for more than they had asked. A year ago, the contract to buy had failed, but now, there’s a line.
Meanwhile, rents are going up along with home prices and for all of the discussion of eviction moratoria and foreclosure delays, no one seems to have a clue on where people are going to go. There also seems to be no plan on the national level to see these circumstances as linked, nor is there any loud drumbeat to create more affordable homes and apartments for families who are increasingly desperate to find them. Talk is cheap, but these programs will be costly. Nonetheless, now is the time to move forward, while interest rates are low and before big whoops drain the housing market dry.