I'm not seeing where mortgage backed securities or mortgages come into play. The investment here is hedge funds buying cash flow producing assets in the form of single family homes as investment property with private capital, and doing so on a large aggregate scale. Nobody is getting a conventional mortgage either on the front end or as a take-out because the property is not owner occupied. The model is effectively a conversion of residential property into institutionally owned investment property.tomfoolery wrote: ↑Wed Apr 14, 2021 9:59 pmHere's where my conspiracy theory comes into play.glennds wrote: ↑Wed Apr 14, 2021 7:37 pm
This is why I thought it was absurd to find a conspiracy theory in any of it. Crunching the numbers, it's a pure business opportunity due to the spread between rent and home prices at a given investment cap rate. This is why institutional money is pouring in, and unless rent drops, home values will escalate to a value based not just on comps, but on an investment value driven by implied rate x cap rate. And if interest rates drop into negative territory, this will go wild.
And I know this is going to sound really absurd and impossible, but play along.
What if Blackrock has agents that somehow can have secret meetings with high ranking US Government officials. I know, ridiculous, but let's say it could happen.
And Blackrock said, "you know it would be a fantastic opportunity for us to buy up more single family homes, if interest rates could come down a bit on mortgage-backed securities so we can buy properties with cash, close in 14 days, and then equity strip with a mortgage. Any chance you can get the Fed to buy a ton of Mortgage Backed Securities to drive the rates down?"
And this hypothetical politician/power broker laughed and said, yeah, "We'll say that the Fed needs to buy $20B of mortgage backed securities every month, indefinitely, to keep the housing market solvent, and even when the housing market has gone up 30%, we'll keep doing it HAHAH"
Besides, Blackrock is only one (big) player among an increasingly crowded field that now includes foreign insurance companies like Allianz and sovereign wealth funds. Even if your conspiracy theory was sensical on the funding model level, it would be a real stretch for a whole crowd of institutions even offshore, to be in on it.
Don't get me wrong though. I'm not necessarily saying this is good. If the single family home market, beyond a few opportunistic markets, is in the process of being institutionalized, it has huge implications depending on how far it goes. Even if the parties doing it are just private concerns practicing good old fashioned capitalism.
Then again if you're a Libertarian, this is just the free market doing it's thing, so live by the sword, die by the sword. Then again, you're a long time registered Democrat, so that last part you can save for your Libertarian friend that you're always trying to talk sense into.