Is this really a good idea?

I mean it sounds like a good idea, right? Housing is too expensive and a middle class family can't even afford to have one unless both parents are working at least halfway decent jobs. With interest rates going up and nobody wanting to give up their low locked-in rate, something has to give.

This whole concept of hedge funds ruining the housing market is something I've talked about at length in previous posts, but after seeing news like this it gives me great pause. Now that hedge funds like Blackrock have already thrown in with Bitcoin I've made many predictions that housing as an investment and a store of value is already in a very tenuous position. A law like this could dropkick it over a cliff in record time.

Free Market Capitalism?

Obviously in a perfect world these regulations would never have to exist. Hedge funds would just regulate themselves and prevent the damage preemptively in the first place. However, the damage has already been done, and winding back those positions by force could potentially make the problem even worse. The last thing anyone wants is volatility and uncertainty within the housing market (one of the traditionally least volatile and least uncertain markets around).

Number go up; Number go down

It's very important to point out that everyone who owns a house wants the value of that house to go up, while everyone who doesn't own a house wants the value of property to decline so they can pick it up on the cheap. Like with any trade, one side is going to be unhappy if the market moves against them. A situation like this is never going to be a win/win no matter how the politicians are spinning it.

That being said I'm personally totally on board with collapsing the housing market. It's what I've been predicting would happen for a couple years now. If I'm being honest I'm surprised it's taking as long as it is. Spoiler alert: I don't own property and view it as more of a liability than an asset. My rent is cheap and I know what I'm getting.

Does this date back to 2008?

If we ask the interwebs it appears we get confirmation on this front.

Following the 2008 housing crisis, large private equity firms and hedge funds bought substantial portfolios of foreclosed homes as an investment opportunity. The federal government enabled this growth through bulk sales of federally backed mortgages and foreclosed properties.

Fun times

So some greedy little goblins were handing out housing loans that they shouldn't have been and big money came in to scoop up the broken pieces at the bottom. These things don't happen in a vacuum. It's all connected and can extend back in time decades past.

Demographics

Another issue of note is that we have a major demographics problem. Boomers are going to be retiring. They'll be moving into smaller homes, retirement facilities, or to the grave. That alone was going to cause a problem, so imagine what's going to happen when hedge funds are dumping such an illiquid asset onto the market as well... along with everyone else who panic sells during the frontrun. Not good optics!

Well maybe the law won't even pass?

Sure but does it even matter at this point? Simply floating the idea like this is going to set off alarm bells. Now with a Bitcoin ETF in play the thing that many have been predicting (including myself) could actually happen. Bitcoin could cannibalize the store of value narrative away from the housing market and leave anyone who owns property today with a smoldering pile of rubble worth 50% or even 75% less than it was when they bought it. Yikes!

You know who else talks about this at length?

@builderofcastles is constantly harping on this idea that in some places people won't even be able to give property away and houses will just lie vacant and gather dust. Do I believe it will get that bad? I'm not that conspiratorial, but the timing of this bill is so suspect I honestly have to wonder if this is all on purpose. Like, they know what they're doing, right? Right? But rather than go off the rails and engage in rampant speculation, let's see what the 'experts' have to say.

New Legislation Proposes to Take Wall Street Out of the Housing Market

The bill would require hedge funds, defined as corporations, partnerships or real estate investment trusts that manage funds pooled from investors, to sell off all the single-family homes they own over a 10-year period, and eventually prohibit such companies from owning any single-family homes at all.

Forced selling...

It feels so much like price fixing and blatant government overreach.
I mean stopping them from buying more is one thing, but forced selling?
That's wild.
Is ten years really enough time to unload?
Will many be incentivized to unload faster knowing that number won't go up?

Homeownership, long a cornerstone of generational wealth in the United States, is increasingly out of reach for Americans as home prices and interest rates soar.

With a divided Congress, the bills are unlikely to pass into law this session. But Mr. Smith said legislators needed to start a conversation.

In a pattern repeated in cities around the country, corporations focused on modestly priced houses, frequently in neighborhoods with large Black and Latino populations, and converted the properties to rentals.

Yep yep hedge funds are racist say no more say no more.

“Wealth has become concentrated in the hands of very few people,” Mr. Smith said in a telephone interview. “This is just another way to do that — to commoditize housing so that investors get all of the money.”

Can you imagine telling everyone that the key to decentralizing wealth and inequality is to collapse the housing market? I love these people.

Ah that feeling when you realize you could easily write this fluff and author New York Times articles. What a joke. Well that's one 'expert' down and my own post is already more nuanced. What else they got? How about Business insider?

Democrats want to kick hedge funds out of the the housing market to improve affordability

Some streets aren't for Wall Street. As the housing affordability crisis drags on, lawmakers are seeking to kick out hedge funds from the housing market.

lol, yes, very clever.

"The housing in our neighborhoods should be homes for people, not profit centers for Wall Street,"

Again this argument is all well and good, but completely ignores that it totally screws over anyone that already has a bunch of equity in a house... maybe already with piss poor interest rates. I have them in my family, and so do you.

At the other end of Capitol Hill, Democrats in the House proposed a separate bill that would discourage Wall Street's involvement in the housing market by charging investors who own more than 75 homes an annual fee of $10,000. The money would be pooled into a housing trust fund to be used to support families with down payments.

This is a separate bill being pushed at the same time. I'm not sure how discouraging it would be to get charged $10k a year for someone who owns over 75 properties, but I guess it's something? But honestly how many people actually own 75 properties? I feel like that must be a short list; is a tax like that even worth it?

According to CoreLogic, investors accounted for 26% of all single-family home purchases in June. That's up from pre-pandemic levels of less than 20%.

Meanwhile, the median home price is up 38% from 2019 to $431,000. And mortgage rates have shot up since early 2022, touching 8% in October. While they eased sharply this month, affordability remains a problem.

So...........

Property going up 10% a year is a problem?
I thought this was pretty standard stuff.
Expected even.

Another worthless article

Just as expected.
These people have nothing to say and give zero insight.
News is a joke.

Conclusion

Too little too late.

This idea that people can't afford a home for their family because the price of housing is too high is a distraction. The obvious reason people can't afford things is because they get paid terrible wages and every year more citizens get automated out of the production cycle. But why focus on the actual problem when we can just try to tinker with this one thing?

Ironically, the housing crisis in 2008 seeded this event and allowed big money to come scoop up everything on the cheap. Now people are pissed and want to force hedge funds to sell. So what's the solution? Oh I know let's create another collapse that'll work... wow I'm a genius. lol.

The problem with this logic is that over-regulating a market, especially a huge one like housing, is going to just spawn more problems down the road. Unfortunately most people don't think that far ahead. Funny enough they also don't think too far enough back in time in order to understand how this all happened in the first place. History is doomed to repeat, it seems.

All this being said I support the idea that we should force hedge funds to sell. Just rip the bandaid off already. This bill certainly won't pass into law this time around, but the fact that it's even being floated is pretty significant. Then again I'm hopelessly biased because I seem to have it in my head that one day soon (either this cycle or the next) I'll be able to buy a property with some silly amount of crypto like 0.1 BTC. Dream Big!