Pension funds and private equity outbid middle class families and buy up to 25% houses in many  areas for rentals

 

House prices in the U.S. are rising because pension funds, partnering with private investors, are buying up huge swath’s pf properties in areas and then renting them out. This is preventing middle class families from bidding for such homes. These partners are buying up to a quarter of the homes available in some areas.

 

An article from the Wall Street Journal said that John Burns Real Estate Consulting has reported that pensions and private equity firms are offering stiff competition to young home buyers. This will make properties more expensive overall, and prices will keep increasing in the long run. The consultant said that the investors rather than young home buyers are the ones who are benefiting from cheap mortgage financing.

 

This will inflate home prices and make it more difficult for the young and the middle class to buy their first property. As the investors are buying property with the sole intention of renting them, there will be an alarming consequence of increased rentals to pay for the increase in property prices.

 

The consulting firm stated that property prices increased by 11 percent, in 2020, despite the pandemic. The company estimates that there will be further increases of approximately 12 percent in 2021 and six percent in 2022. The CEO John Burns said that approximately 20 percent of homes are bought by individuals who never occupy the home they bought.

 

The trend is catching on across major cities in the nation including Miami, Phoenix, Las Vegas, Houston and more. Some of the large investors along with pension funds are

 

  • Pacific Coast Capital Partners with California State Teachers’ Retirement System
  • Lennar Corp with Centerbridge Partners and Allianz

 

John Burns Real Estate Consulting said that limited housing supply, low rates, a global reach for yield and what they call the institutionalization of real estate investors has set the stage for another speculative investor-driven home price bubble. Meanwhile, first home buyers struggle to compete with these cash-flush investors.


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