A few weeks ago we examined the intervention of big US corporations in the housing market, buying up much of the available supply and renting it out at the highest rates the market will bear. A few days later, we noted that those corporations and their media allies were mounting a propaganda offensive to persuade Americans that renting was better than buying your own home. If you haven't read those earlier articles, I suggest that you do so before continuing with this one. They provide essential background information.
Tom Luongo, whom we've met in these pages on several occasions, argues that there's a hidden agenda in this situation. I think he makes a convincing case.
Vandals are in charge in D.C.
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Everyone on both sides of the residential debt divide is staring at a step-function reset of their cash flow when the eviction moratorium ends and that step-function will be a doozy, down.
Then when you think through what it is that Davos is trying to do with the Great Reset, which they have stated forthrightly, it is very clear why this moratorium has been extended until this summer, far beyond when it should have been … It has a lot to do with forcing both landlords and debtors into bankruptcy simultaneously, and do so when the bulk of the next round of government spending can be doled out to those closest to the Washington laundromat … bankrupting the middle class is their raison d’etre.
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Once you can’t hold back the “stay in your homes until XXX” narrative anymore you lift the moratorium … There is little to no incentive to go back to work for even $12/hour when the government will pay you more than 2/3rds of that to stay at home … Now all those people have more than a year of back payments to make, which they can’t. The landlords need the money now to keep from being foreclosed on by the bank. And guess who gets to swoop in and buy up all those single-family homes and apartment buildings with newly-minted USG ‘infrastructure’ spending money?
You guessed it…. Blackrock. That story made it out into the world in April with a piece by the Wall Street Journal.
If you think we’ve seen the peak of Blackrock’s takeover of the economy, just wait until people have to pay their mortgages again.
You really will own nothing and like it or else. But wait, there’s more.
Blackrock will buy those houses at pennies on the dollar. They will wipe out hundreds of billions in mortgage debt but, more importantly, they will force a massive reassessment of housing prices across the country. And … Blackrock et.al. don’t even have to buy indiscriminately to have maximal effect.
They’ll just buy up the properties in red and purple districts to flip the electoral map. Under Obama it was called zip code targeting. And it’ll be accelerating once the eviction moratorium ends sometime soon.
Who do you think they’ll move in there? Well, go ask the people in places like Minneapolis.
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And what will that do to the price of your home? You who worked through COVID, who did things right, who paid their mortgage? Oh right, you’ll now be upside down on that place you just bought in Florida or Tennessee to get away from the lunatics in California and New York.
Hamster meet wheel.
This is why you get out of debt in the face of a crisis. Don’t always assume they want endless inflation. Deflation of specific assets is always how they consolidate power. First they’ll make you feel rich through the boom and then they’ll take it away with an inexplicable policy error from the Fed (sound familiar?) and there’s trillions in zero-cost money to help get out from underneath all that stress.
All you have to do is embrace extreme minimalism.
There is no recovery story now. There is only liquidation of the middle class and the destruction of even the veneer of civility granted by the suburbs.
There's more at the link.
Read for yourself how Blackrock is intimately involved with the Federal Reserve and the Biden administration in implementing their policies. To say it's "in bed" with them is a massive understatement. The Federal Reserve literally could not implement its policies without someone like Blackrock enabling it to do so. That results in three outcomes, all of which I think are negative.
- Blackrock (and/or any company like it) gains enormous influence with the powers that be, so much so that it can arguably create and/or direct national policy in some areas.
- Blackrock (ditto) makes a monumental amount of money out of that relationship through fees, administrative "expenses", etc. (we're talking potentially hundreds of billions of dollars over time).
- Blackrock (ditto) can now use those profits to fund its purchase of thousands of US homes, converting them into rental units and setting itself up for an ongoing and massive revenue stream from housing. Effectively, US taxpayer dollars are subsidizing such companies as they buy our homes and remove them from private circulation.
If that doesn't make you worry like hell, I don't know what will…
Of course, one can't blame Blackrock for taking advantage of government policies like this. They're doing what any corporation would do - making as much money as possible off policies that they can influence, even write from scratch, to their benefit. You or I would probably be irresistibly tempted to do the same, if we were in their shoes. However, understanding that doesn't make it right, or ethical, or moral (depending on what, if any, moral standards people observe these days). It also doesn't mean that those who will suffer under their "make hay while the sun shines" policies are going to be any less bitter, resentful and angry about the fact that they aren't making any hay at all - in fact, they're being deprived of what little hay they have left.
Think of entire suburbs, presently relatively safe and secure places to live, transformed into inner-city combat zones such as we've seen over the past eighteen months in Minneapolis, Chicago, Seattle, Portland… you get the idea. That's what happens when people no longer have pride of ownership in the places they live. If they don't own it, why should they take care of it? That's the landlord's problem! And if the landlord couldn't be bothered to spend money on that sort of thing, because he/she/they want to maximize their income and minimize their expenditure, well, that's just too bad for those who live there, isn't it? And if the landlord is in bed with the powers that be, who's going to force it to fix those problems? That's right - nobody.
What will be the end result of that vicious circle? Try this, for a start:
According to the Gun Violence Archive (GVA) … the Fourth of July weekend was the most violent weekend in the United States so far this year.
Roughly 233 people were killed in the U.S. and hundreds more injured from 5 p.m. Friday through Monday, according to the GVA data. The organization reported numbers exceeding 600 injuries as of Tuesday morning and is still finalizing numbers collected from police, media and government sources in real time.
Would you care to venture a guess as to how many of those shootings took place in residential suburbs where most people own their homes, and take pride in them? How many, do you think, took place in suburbs where most people rent, and/or are dependent on government housing assistance, and/or don't own much of anything of any value at all? I'm sure I don't need to tell you what sorts of areas attracted most of those crimes.
If people have no investment in the place they live, they won't care about it, and they'll devalue it rather than adding value to it. That's got nothing to do with race, or creed, or any other social factor. It's simple human dynamics. Deprive people, crowd them together, treat them like things or animals rather than human beings, and they'll start to behave as such. Read the results of the "behavioral sink" and "Rat Park" experiments, and you'll find many elements that I suggest can be identified in our urban society today.
Our housing situation is turning into precisely that sort of vicious circle. I can't help but think we're going to see it "up close and personal" in far too many of our cities over the next decade or two.
Peter
You make me glad to have no mortgage! Many years ago the company I worked for was sold. A colleague and I had joined years earler, only a few weeks apart, and we got good redundancy payments. But he was weeping and wailing because he'd just moved upmarket to a fancy bigger house and could no longer pay for it. While I as still in the house I'd bought when I joined, improving it when I could afford, and only had a small remaining mortgate that was far lower than my redundancy payment. It pays to live within one's means.
ReplyDeleteBRM - I did read that original article, and the Blackrock Response (in the form of an editorial). The arguments being made were mind blowing to me, who sees the value of ownership. It is precisely true that what you do not own, you do not care for.
ReplyDeleteWe are starting to discuss how we are going to handle the house my parents used to live in and their rental. To be honest, the current state of affairs terrifies me in terms of renting out either. Renters have literally all the rights now with no responsibilities.
The sad reality, of course, is that those that think this is a good idea do not want to live in the actuality of what it looks like.
We owe on our mortgage but it is within our means, and we have no intent of "upscaling" - if anything, we will downsize. Why anyone would acquire a 30 year mortgage in your 50's or 60's is beyond me.
From what I’m hearing in housing forecasts webinars there is no wave of for closures in the offing. At least in California. Amount of people behind their mortgages are low. Lots of equity. Loan stands were tightened do new buyers are not over leveraged.
ReplyDeleteThe Covid recession hardly touched the laptop class. It was more a lower paid worker incident.
Owning your home and being debt-free is the best way to have low living expenses in your old age.
ReplyDeleteHomeownership is one of the few paths open to middle class families to create multigenerational wealth.
The concept of "You won't own anything and you'll be happy" is dangerous propaganda.
Don in Oregon
3 years left on my mortgage in a small town (<5k people). So far my plan is working. More concerning would be the status of those around me.
ReplyDeleteIt's going to get worse than what you (Peter) are reporting, because the Dems are wanting to restart in a big way the whole Fanny Mae and Freddie Mac subprime mortgage with low low low initial payments for the first 5 years followed by whopping huge balloon payments.
ReplyDeleteShades of Barney Frank and the whole cause of the subprime mortgage crisis in 2007/8.
As to the root cause, I look no farther than the Auto Industry and their "Leasing is better than buying" attitude. Newcomers to the wonderful world of adulting have had no experience with real mortgages, no experience in minimizing their debt and have everyone yelling at them to Lease, Rent, let someone else take responsibility for all the hard stuff, get it new every 2-3 years, yada yada.
This has been going on since the Clinton Era and the Covidiocracy has just made matters much worse. Sadly.
Landlords will be screwed. Which means that ultimately renters will be screwed. Which means that ultimately ultimately the banks and mortgage companies will be totally hosed.
All because the leftist overlords want to cram everyone into soviet-style housing blocks.
And it ultimately comes down to Control. It's easier to control the peons if you control where they live.
Why would Blackrock want socialism?
ReplyDeleteI can see them wanting in on the the game of controlling the world (like Google, Facebook, twitter and the others are trying to do) but socialism?
We live in strange times, interesting too (like the Chinese curse).
@ray,
ReplyDelete"
Why would Blackrock want socialism?"
--because the get elevated to the peerage without all the bowing and scraping... In other words, they'll get their dacha on the lake, or huge rural estates with unlanded serfs providing rental income.
It's a return to feudalism/royalty/landed gentry in the west, and the true face of communism (party apparatchiks at the top, workers living as serfs below).
See also 'rentier class' https://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/class-rentier
"Rentier is a class of people who derive their incomes from financial titles to property. Though the term makes an analogy with the old rent-earning class of great landowners, rentiers are characterized by their more distant relationship to the property they own. Rather than living in an estate in the midst of their property, they own a variety of anonymous income-earning assets, most typically shares and instruments of debt. From the rentiers, all vestiges of the paternalism, noblesse oblige, and personal dependence that once characterized the landowning aristocracy have vanished, leaving them as pure consumers of financial revenues."
They may not want to be Kings, but they wouldn't mind being Dukes.
n
If Blackrock and Co. could stay in the housing market for 10 to 20 years, I'd be more worried about this as a trend. Instead I see it as a sign of a market top (i.e. an eventual good sign).
ReplyDeleteThere are a lot of 1000 to 1400 sq ft. one story houses in the back part of our neighborhood. In the last housing market crack-up (2008ish), there were a lot of places bought by rental companies to be rented out. Within 3 years, every one of those houses were flipped and sold back into the ownership market. A few sophisticated rental companies survive here because they are divisions of remodeling companies, but even the commercial rental people are dragging about.
These companies will spend big money, then have the places devalued through wear-and-tear, problems getting rent, and overpriced property taxes (you think local government is going to skip THAT cash cow?). In the end, they'll dump just like everyone else has.
This is certainly a "sell the dollar" sign, because the "smart money" is trying to get out of money entirely. A contrarian would say it's deflationary (all the assets will crack up), a gold bug would point to the fact the Fed is trying its best to create hyperinflation. The rest of us may well be embracing the power of "and" (a hyper-inflated currency WITH asset devaluation in fixed-value terms).
@Kentucky Packrat - You're correct! This has been tried before, and it did not work out well. Waypoint Homes. I rented one. Here's how it went: The realtors were at first happy to work with them, and they had some good people who wanted to do things the right way. They did spend money as homes were acquired to make them nice. Then the numbers people began pressing them to hold down maintenance expenses, and raise the rent a bit more at renewal time. As a lessee the only way I found to get things done was to refuse to renew unless my list of work items was addressed. That worked. I found out that realtors were not showing Waypoint's houses because of the growing bad reputation... Profitability numbers were not met, Waypoint got acquired, you can guess why. New management, wash and rinse, repeat...We found a (much) better house to rent for no more money from an owner whose work had taken him and his family elsewhere. In our case we weren't looking to buy because our final retirement destination is another state in a few years. At some point these homes will get divested back into the general market. Not a crisis.
ReplyDelete
ReplyDeleteCorporations much prefer Socialism to Capitalism so long as they are in a monopoly.
Why compete when you can get money from the treasury?
Blackrock is HUGE ($9T+) right now, no way can I see them pulling for socialism.
ReplyDeleteWhy not if they think they will be on top.
DeleteDon't forget, tye management class is full indoctrinated to the lefty BS
Now take a look at the excrescence that is Land Value Tax. That's a sure way to eliminate private home ownership.
ReplyDeleteThis is exactly how to create the world of "1984" without the nuclear war. They want us to own nothing, to be completely dependent on government for our employment, and they don't care that their greedy, corrupt policies will actually cause housing and infrastructure to decay to third-world disasters. "Minimalist" living is all you will get unless you are an Inner Party Member.
ReplyDeleteWhy would Blackrock, a company that became successful by investing in American capitalism, turn to the dark side of communism? Because power is the ultimate addictive drug, and its executives can no longer stop themselves or see the reality of what they are doing.
Kentucky Parakeet and Etaoin Shrdlu - You guys are thinking as traditional Americans with some feedback from the people. Big inflation is coming, some fear hyper inflation. For small Land Lords they will go out of business because you can bet the government will suspend rent payments but bail out the big corporations.
ReplyDeleteThese are people for whom greed is not one of the 7 deadly sins, but a virtue. They are not farmers. It has flabbergasted me how the ruling elite are acting against the middle class, who basically generate the wealth, but they are also short sighted and really don't understand wealth generation. These people miss their surfs, this is the great reset.