Comment by tsimionescu
2 days ago
This only works if all those houses are on the market. Nothing is stopping today's rich people from buying up all new housing, and only letting a handful be on the market so as to not flood the market and not let prices go down.
They do not have enough capital to do that. Housing is such as large market that eventually anyone but the state would run out of capital. And it is not actually even that profitable... There is much better investments.
You don't have to buy out the whole market. You buy the houses that are likely to turn over, and then you make sure that they don't until you want them to. Housing and rent is set at the margins. If the average price in your area over the last year for comparable housing was $300k, and the last three comps sold for $400k, your asking is $400k.
It's exactly the situation you'd expect with record high prices and low sales volume, which is where we're at.
What’s stopping rich people from buying up every car in existence and making you pay $1 million for an accord?
Ah, the classic investment strategy of eating up the cost of keeping a house empty, so that others who do accept renters would make more money
”The rich” aren’t that stupid, why would they take the losses to support someone else making a profit?
I recall an article on HN quite a while ago about one of those property management companies/websites in the Bay Area. The article was detailing that, while the majority of people looking to rent out their properties were individuals and not the ultra wealthy, the app "encouraged" price-fixing, including things such as keeping a certain % of lots vacant on purpose in order to drive up prices artificially. I put encouraged in quotes because it turned out that a prerequisite of managing your properties through this application was actually complying with the price fixing, on an app-wide scale of all its users.
So despite it making no financial sense on an individual, house-by-house level, what happened in practice is that the market itself got strangled by this collusion and despite the existence of many empty houses available for either purchase or rent, you ended up with a non-negligible amount of these places not ending up in the market organically and as such driving up the costs for everyone. The property owners win big with this scheme of course, and the way things were setup you'd be a fool to go against the grain and try outcompete on cheaper housing, since you can't beat an entire market getting strangled.
So yes, "the rich" aren't that stupid, they just so happen to have systems that make these sort of moves profitable.
Seems like this article had a large impact on your understanding of the housing system. Could you post it so that others can read it too?
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It's not about the rich being stupid. It's about banks only creating credit for "sure bets". Housing.