If you’ve been eyeing home prices, you’ll notice that they are up almost everywhere, by double digit percentage points from last year. Why?
It turns out that investors are bidding up houses in search for yield. And if you step back, it makes sense from their perspective. They literally have nothing else to do with the cash. Stocks seem overvalued. Bonds are yielding 1.5%, and with “official” inflation numbers at 5%, they’d be getting into a contract to lose money. In this environment, collecting rents seems like a good way to make some real income that actually beats inflation.
Investors large and small have figured this out:
From individuals with smartphones and a few thousand dollars to pensions and private-equity firms with billions, yield-chasing investors are snapping up single-family houses to rent out or flip. They are competing for houses with ordinary Americans, who are armed with the cheapest mortgage financing ever, and driving up home prices.
Flush with newly printed cash and near 0% rates, these investors have virtually unlimited resources to outbid you and me trying to buy a home for our families. A Twitter thread from last week resurfaced the below WSJ article published in April. Read the whole thread, then try not to curse at your screen:
It seems to me that Blackrock is betting that interest rates remain low for quite a while. If interest rates go up too high, we would very likely see a global crash in stocks and real estate. This is because everyone is levered up to the gills in debt, from governments to zombie corporations, which would cause an unbearable amount of income to be redirected to paying the interest. I think they are calling the Fed’s bluff here.
This is not like 2008, where we were (at least outwardly) concerned with the debt. This is a whole new ballgame.
Perhaps Blackrock sees that the only way out of this mess is a soft default, where we inflate the debt away. Maybe they are front-running the Fed, knowing that they’re just gonna keep printing their way out of this mess. Interest rates are so low, it makes sense to borrow as much as you can of the infinitely available cash to secure finite resources.
more renters means worse neighborhoods
The social and moral implications of all this are profound. Ownership makes people feel empowered and responsible. The mindset of a renter is very different from that of an owner:
Owning makes people take responsibility and feel more investment in their community. Renters are less-invested and more easily detached. When more money and commitment are on the line, in the aggregate people will behave better. So this entire financial dynamic also ruins more people’s quality of life and degrades social standards for more people.
https://thefederalist.com/2021/06/11/what-happens-when-hedge-funds-buy-up-neighborhoods/
It’s clear that our overlords have an agenda in mind: serfdom. They want to own everything, and have us all run on the hamster wheel, faster and faster. I still can’t believe this is a real quote:
bitcoin can fix this mess
This is all happening because the money is broken. If we had money that didn’t get melted away by inflation, and if we had an interest rate market that was true and honest, none of this would be happening. You would be able to take your money and put it in the bank and earn sufficient interest on it. You wouldn’t need to buy investment homes and outbid the newlyweds who are just trying to live in a decent area. And the cost of a home would be the value you get from living in it, full stop. Homes are not meant to be investments. It just seems that they are because our monetary system is trash.
Bitcoin is the separation of money from utility.
When gold bugs argue that gold has value because it’s used in dentistry, jewelry, and electronics, they are missing the point. Most of its value is due to its use as a money:
Bitcoin has no use outside of being money. It doesn’t mix utility and money, like real estate, art, fine wine, and watches do today. It does one job and it does it beautifully: preserve your energy.
As the market figures this out, I suspect bitcoin will continue sucking the monetary premium out of EVERYTHING, because bitcoin simply does it better than everything else.
More importantly, what this will do is allow everyone, rich, poor, and in between, to save their wealth in something outside of the physical realm. Houses are no longer investments. Neither is art, or fine wine, or rare watches. All of that will have value simply for the sake of its utility and enjoyment, and NOT because we want to “invest” in it.
If this happens, the cost of everything should plummet, as there is no longer competition to buy up scarce real assets in “meatspace”. All but the most passionate real estate investors will dump their properties, which are subject to taxes, maintenance, fees and illiquidity, and will choose to hold their value in something even scarcer with less headaches.
a fork in the road
And so we’re left with two options:
If bitcoin succeeds, you will no longer compete with Blackrock to buy your first home. You will be able to own property. You will live privately. And life will never have been better.
OR, the overlords will have their way:
cheers,
mina
P.S. Some 🔥 tweets this morning: