Anyone seen Blackrock impact on housing and which areas?

115 Replies

Probably just a lumber dip. I found this : “Mortgage-finance firm Freddie Mac estimated in April that the U.S. is about 3.8 million houses shy of meeting demand, thanks largely to the lack of construction following the 2008 housing crash.” Very significant considering all the buying Blackrock is doing . Checked and OSB is still $45 insanely high. I’ll bet they go up more based on the demand. Lowe’s told me they saw OSB spike to $70 per sheet a few weeks ago. Lumber prices coming down might mean like “only” 4x pre shutdown.

In many markets, I don't see how a large institutional investor can overpay for scattered single-family homes, given the management costs and challenges, vacancies, management inefficiencies, cost/rent ratio, even with the anticipated inflation coming.  Can it be a matter of a company with a bunch of money who thinks they need to spend it somewhere, like some hedge fund managers?

Originally posted by @Jon Greer:

@Joe Splitrock the "theory" isn't that Blackrock will buy all the houses and take over the government. I'm researching how Blackrock is buying all the houses in certain areas as reported by many credible news sources, and how they are being funded by the government (not sure about). Government bailouts and intervention in extreme markets does happen. None of these things should catch you by surprise. The government was trying to pass a bill that would give over 100% debt forgiveness for all people excluding "white" to start a farm and get paid to do it. A Wisconsin federal judge just rejected it as racist bidding of the government. Farmland is a significant part of real estate. How is the government influencing REI right now is an important question, and what kind of funding is being applied. Where does the small investor go, as many here are new to REI and should be learning about the market at large. I think the frustrating thing here for many seasoned investors on this forum, is the scale and level of dramatic change is unprecedented, and they don't have experience with this current market. It's never happened like this with lumber prices 3x-7x, housing prices so high for so long yet still a housing shortage, and people moving in mass away from some of the biggest cities to other states. Places like Idaho, Missouri, Tennessee have seen land prices more than double in the last year or two. Never happened so quick. Where does this lead? It seems we have to look forward and maybe really far back to when something like this happened in some other country. People that didn't have assets or real estate to sell will have to be very creative, lucky or blessed to break into this market from their job savings. Which leads to the question all ask here, will it come down aka crash soon? And most are saying it doesn't look like the trend goes away right now (I think), so how do we figure this thing out?

 BlackRock is buying houses, but people are talking all sorts of conspiracies in this thread. 

The "funded by the government" comes from the fact that BlackRock has been contracted by the Fed to manage federal funds that are invested in the market. BlackRock is an asset manager, so that is what they do. The concern people have is over the scale and coziness of the relationship. They managed assets during the housing crash. That included buying toxic assets as bail outs and buying mortgage backed securities. They also helped with Fannie Mae and Freddie Mac toxic assets. They manage the federal employee retirement plan. They manage some state retirement and even foreign government retirement plans. To prevent the stock market from free falling last year, BlackRock invested government money to prop up the market. The Fed also hired them to buy mortgage backed securities, which is why mortgage interest rates have remained low. 

The best analogy is if you went to Edward Jones and gave them $1000 to invest in the stock market. Edward Jones is investing your money and gets a fee for their services. That is how BlackRock works for the Fed. It is also important to differentiate that the Fed is the Federal Reserve and it runs independent of the US government. 

Debt forgiveness by the US government is technically accomplished by giving loans that don't need to be paid back. You get either partial or full forgiveness. That happened a fair amount during the last year with programs like PPP and EIDL. Plenty of white people benefited from that. I know countless landlords on BP who took money, despite having no income loss. I also see people on BP talking about wanting student loan forgiveness. Loan forgiveness is scary regardless of what color the person is receiving it. The "forgiveness" just means that tax payers are covering someone else's debt. Tax payers are me and you. I paid for my own school by working through college. I paid for my rental properties by getting a good job, getting promotions and sacrificing my life style. Nothing was handed to me, so why should I have give my money to people who got in a bad situation? The problem is we raised a hand-out generation. People don't want to work, or they only want to work if they love their job. I have worked plenty of horrible jobs, because that is what you do to put food on the table. The problem is people want the lifestyle without the sacrifice. The politicians are to blame. The reason the founding fathers only allowed land owners to vote is so that only tax payers were voting. They knew if the "general population" was allowed to vote that politicians would just promise them money (handouts, debt relief, etc.) to buy their votes. Half of Americans pay no taxes, so of course voting for politicians who will give them debt forgiveness doesn't hurt them at all! The founding fathers were right, but it is too late. I do not agree with debt forgiveness, because it doesn't reward productivity, therefore it is a drain not an uplifting force. 

As far as the unprecedented situation today, it can be explained by simple concepts. Although this exact situation has not happened before, we can understand what is happening and why it is happening. It comes down to supply and demand. When large imbalance occurs, there is price surges. Once the labor, materials, etc. catch up; the prices will level off. The only exception to that rule is when a resource is constrained, such as land. The only option when you have constrained land available is redevelop existing land or build taller. This is why real estate is a special kind of investment.


As far as the question of a crash, I have been one saying there will not be a crash. Even with higher costs on lumber and housing, the fundamentals still look good. I predicted a stabilization. I don't expect lumber prices to drop, but rather stabilize at a new high. Same with housing prices and rents. Of course like with any predication, it is subject to change as variables that are always shifting. The more something inflates quickly in cost, the greater chance it could drop. Government spending is at scary levels and things like mass debt forgiveness could push us over a tipping point. Most crashes seemingly come out of nowhere, so they are hard to predict. 

The question of how do you invest with job savings only is not a new one. People on BP were saying that prior to the pandemic. People say everything is too expensive, then it gets more expensive and they still complain. The reality is that wages will need to catch up with expenses. I have a tenant who is a cook at a restaurant. He told me yesterday he has gotten two raises in the last month. He is one of two cooks - they should have eight! He is making $30 an hour at a mid priced restaurant as a cook. If people don't want to do a job, someone else will do it and get paid to do it. So what is my answer? Now is a good time to be working three jobs or changing jobs for money money. Labor is constrained.

@Joe Splitrock wow, thank you for that educational response! That sheds a lot of light on the subject. Great stuff. I think most of us in plain sight don’t see a difference between the Federal agencies and government. They all seem to be connected, but I do appreciate the detail.

Originally posted by @Jon Greer:

@Joe Splitrock wow, thank you for that educational response! That sheds a lot of light on the subject. Great stuff. I think most of us in plain sight don’t see a difference between the Federal agencies and government. They all seem to be connected, but I do appreciate the detail.

 

I am glad it was helpful, I feared I was rambling, haha. I agree most people do see them as the government, but they really are not. The Federal Reserve is special because it was setup to be autonomous. It is not technically a government agency like the Treasury Department. The Fed is owned by nobody, receives no funding from Congress and gives all its profits to the US Government. That is the flip side of the Fed buying mortgage backed securities or stocks. They sell them for profit later. Over the last ten years that amounts to likely over a trillion dollars in profits. 

The Fed sets monetary policy and cannot be mandated by the President or congress. Theoretically they are above partisan politics, which is important when setting monetary policy. It is amazing the number of things they regulate and influence. My wife works in banking so she has given me geek level education on the subject matter. 

@Mike Hillman

You said it yourself “just at a larger scale” “deploying large sums of capital” the money is not raised from passive individuals, accredited non accredited investors it is just moved from retirement accounts, 401ks, etc. This funds they don’t get paid on performance of the houses they get paid based on commissions, does it ring a bell? Lenders back in 2005-2007 got paid on commission too and what happened to the economy?

Anyway.

I can see something bad happening here when deploying capital is not a risk for the fund managers since they get paid on deploying capital not performance of the assets.

Not sure they impact, but in the past they have bought through Invitation Homes, but there are plenty of other big players like this and they have been buying since the last crash.   Same markets everyone seems to like....Arizona, Texas, Florida, Carolinas, Georgia...and a few other select cities.   Floods of cash, low returns and high risk in other ventures make them like real estate.  I'm sure they've made an impact on PM companies as they seem to self manage and have taken so many other rentals off the mom and pop market.   They also pay good money for homes so I'm sure it impacts both owner/occupant buyers and also investors.  They pay way way way more than most small investors want to pay.

They’re hedging the world corporations with our local real estate, lest the corporations went bust during this “pandemic” as they suggest. All the while somehow they’re providing affordable housing for rent which I’m sure the local landlord has been capable of for all history. So they’re stealing the position of home buyers, landlords and RE investors in the hottest markets, while promoting this will benefit the global corporations invested in their most recent 1.7 billion raised. This announcement was released just yesterday and I don’t have total understanding of it, other than what I read off the link to Yahoo from Joe Splitrock.

@Carlos Gonzalez - in my experience, the fund managers are highly focused on their reputation in the market because it drives more investment and more fees. So even though the investment returns (and losses) go to the LPs, mismanagement by the fund manager would result in a decline in reputation and ultimately, assets under management. Blackrock didn’t get to be the biggest fund manager by making poor decisions. It could be that they can pay aggressively for assets because they are big enough to command terms elsewhere in their platform that others cannot (e.g. preferred financing) which results in better yields.

@Jon Greer

Large scale investment firms like Blackrock and Invitation Homes are buying homes due to the shift we have been seeing in the market. People are getting g out of the cramped living in the cities and moving into the subs. SFH was seen as a beginner game but now is considered a main stream investments due to this shift in renter behaviors

@Donald Dooley wow, and Grant Cardone said no one is going to want to own a single family home. Now SFR's are the hype and harder and harder to find turnkey. I wonder how hard this hits multi family in big cities.

Originally posted by @Jon Greer:

They’re hedging the world corporations with our local real estate, lest the corporations went bust during this “pandemic” as they suggest. All the while somehow they’re providing affordable housing for rent which I’m sure the local landlord has been capable of for all history. So they’re stealing the position of home buyers, landlords and RE investors in the hottest markets, while promoting this will benefit the global corporations invested in their most recent 1.7 billion raised. This announcement was released just yesterday and I don’t have total understanding of it, other than what I read off the link to Yahoo from Joe Splitrock.

 The $1.7 billion raised is for their infrastructure debt fund. As the name implies this is infrastructure. They are investing in things like data centers, toll roads, wind energy. These are big infrastructure projects where they provide funding. They are funding huge projects that are outside the scope of banks. I don't think that fund is used for single family homes, but maybe used for a large development project.

This is game over power consolidation. Blackrock is bigger than Amazon, google and tech companies combined and owns the largest stake in Coke who is also buying up the SFR's. The largest institutions have shifted to SFR and they are working against renter's rights in the ballot box campaign. They are deeply tied to the Democrat party donation machine as well as a mountain of non profits, and are active in the climate change initiative as well as all the other appropriate racial corrections. Blackrock is the hugest manager of assets hands down globally and is coming to a town near you one way or another as they roll out their brand newly funded 1.7 billion infrastructure initiative, and the 1 trillion of federal funds into who knows what... They are making your start to real estate investing hard, and causing your real estate taxes to go up. Make no mistake about it, Wall Street is finally gobbling large chunks of the real estate market, moving the prices way up and shrinking the inventory. The low interest rates are their friend and helping them leap ahead even further. This will not last long without a fight against them. People are just finding out about Blackrock's position with corporations and federal reserve, as well as partisan politics and global initiatives. Thanks for the info Bigger Pockets, this forced me to study this hard today. Hang onto your shirts!

@Stephen Bradford. Do they not have the right to buy those houses? If they want to pay more than someone else that's their choice. If you were selling your house and you got a higher offer (possibly even all cash) from a company than a first timer home buyer on an FHA with tons of stipulations and red tape, what would you do?

Or better yet. Let’s think about it this way. Institutional investors (corps) are buying houses. Aren’t many of these publicly owned companies, which are actually owned by shareholders (ie more people), so that’s profit that gets paid out in dividends and potentially increase in value overtime in the form of returns as they go up in price? But wait a second. Don’t you have the right to buy stock in those publicly traded companies just like everyone else? But what if other people buy the stocks for more money than you’re willing to pay, don’t they have that right?

Do you have a 401k or IRA? Do you own any large mutual funds or target date retirement accounts? (If you own a VTI, VTSAX, S&P500 funds, then you actually are a part owner in BLK or other institutional investors). You might have even received a proxy vote in the last couple years and might not have even looked into it or read the annual report. perhaps you might have had the opportunity to have your voice heard directly by that corporation…and in a round about facetious sort a way you are actually complaining about company that (possibly) you and millions of other Americans like me are part owners of and relying on the industriousness of capitalist corporations to be resourceful and successful so that we can rely on them collectively to earn us a fair return on the stock market so we can rest easy when we check our retirement accounts that they made a return. If you don't own any stocks, then that's fine if you choose not to.

It’s all a circle and it’s called a free market. It’s not a perfect system but if you spend too much time and energy complaining about it, you miss out on the opportunity that others are pursuing. Pick a strategy and go for it, there’s enough to go around for those that seize the day.

@ Brian Ploszay


Blackrock is one institutional investor buying houses, but they are a very small percentage of the market. No group can corner the market, or really make a dent nationally on pricing.

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National perspective (except for political purposes) is irrelevant: real estate is uniquely a local-conditions driven market. On a local level, Black Rock and its ilk can and do have large impacts.

What is interesting is finding out why Black Rock is not investing in places that it is not investing in -- like Chicago. That would highlight what is wrong with those areas and what needs to be done to fix them. If you are an out-of-state investor, it seems like following Black Rock into a market would be a good strategy, as it has done the research for you.

@Account Closed I think this is an interesting thread and I am following it.  And I agree with some of what you said in your latest post.  But, I really think there are markets / cities / states that Blackrock (and the other institutional investors) are not in, are not interested in, and are never coming to.  If you look at the single family rental market, non-institutional investors still own 95-98% of the inventory (depending on your source.)  Thoughts?

@Nicholas L. Absolutely, however they are rolling out a huge infrastructure initiative that probably will effect a wider range. What kind of infrastructure would Blackrock be implementing? I don’t know... it can’t be roads right? I think this will be the things the current regulators have a hard time applying funds to. It will probably all be under the banner of “save the planet”, so anything goes type of deal. I’d like to know what the 1 trillion federal reserve funds are exactly going to, the 1.7 billion just raised from international corporations for infrastructure, along side their much larger investments. It really sounds like global corporations are paying to have a seat at the table of what they see as an entirely different wave of global government, ushered by climate intitiatives. This, I expect will change energy codes and regulations on a broad scale nationally. But as you mentioned, there should be markets that aren’t being touched basically, I think this is the trend right now, where people are trying to move to these, however some people left CA or NY for TX or AZ where they will find Blackrock and all the regulations following the masses. My concern is that this is a pump and dump, which causes people now to pay their life savings and in debt themselves for a house, or pay high rent, become slaves to debt, then crash the market. How to crash it, I don’t know, but if you had as much power and ties to the federal reserve as Blackrock, you’d want to control a crash rather than be subject to it. Then jobs and wages go down, no one is happy with their mortgage as the joneses next door enter a mortgage for $100k while they’re at $700k paying 7x per month, so everyone forecloses to start over, but this start over is different and Blackrock is at the center of it again, but probably has other corporations they’re already shifting to, to hide their identification etc. Basically, our country is already a slave to corporations and government, and it’s about to be defined. Nothing happens without push back, and nobody knows what will happen, but the momentum speaks loudly. If you want to talk about pockets in the market that aren’t effected, I can speak to that. I owned land in rural TN, MO, and am involved in flipping currently, all in non hyped areas, but the prices are double at least on land from pre shutdown in the most secret places of our country, and home prices in these areas are insane. BUT, there’s always war zones and those are getting way crazier!