The housing “recovery” that isn’t
by David Atkins
While Republicans and shutting down the government, threatening the full faith and credit of the United States, and generally wreaking havoc on consumer confidence and the economy in general, it’s worth a reminder that the economy is still broken.
You know that housing “recovery” we’re supposedly seeing? About that:
Josh Rosner recently released the astonishing statistic: that sales of owner-occupied properties showed only a 1% gain in the last 12 months. The gains that have been driving the indexes were all in investor owned properties. Some flipped to other investors. In hot markets, local investors have been doing “mini-bulks,” acquiring small portfolios to sell to private equity investors, some without renovating them, others with modest fix-ups. Others sold them to homebuyers.
Around half of these purchases driving up housing prices are cash sales as well.
Also, there’s this:
Of the 87,062 foreclosures in the last five years that were bought by corporate investors and have been flipped, about a quarter were sold for at least $100,000 more than what the investor originally paid, according to [an online real estate listings site] Redfin (Although it’s impossible to know how much investors spent on upgrades or renovations.)….
The boom-bust-flip phenomenon is just one of the most obvious ways that research suggests the financial crisis has benefited the upper class while brutalizing the middle class. Rents have risen at twice the pace of the overall cost-of-living index, partly because middle-class families can’t get the credit they need to buy. That means “landlords can raise rents with impunity,” says Glenn Kelman, chief executive of Redfin. And according to a report by David Autor, the M.I.T. economist, job losses during and after the recession were concentrated in midskilled and midwage jobs, like white-collar sales, office and administrative jobs; and blue-collar production, craft, repair and operative jobs.
In case all of these numbers make the head spin, it’s really a very simple equation.
Wages haven’t gone up in forty years. Some people were lucky to buy houses early; others bought in late. Then the economy crashed, and a lot of people were underwater. The economy is still fragile. So where is the housing “recovery” coming from? Who can afford to buy all these houses at higher prices?
The answer is investment banks, and people who bought in early with equity to spare looking to trade over or buy a second home. Where it isn’t coming from is actual normal people who live in houses. The housing market among normal people who live in the houses they buy has only gone up by 1% in the last year.
So if housing prices are going up dramatically, who is raking in the money? Certainly not regular people trying to put a roof over their heads. Those people are getting hosed. Investment firms and lucky older homeowners cashing out 401Ks and homes purchased 10-20 years ago, on the other hand, are doing quite fabulously in the new market.
And it’s in this environment that the entire Republican Party has decided its top priority is to shut down the government in order to stop people from getting access to health insurance, while both parties are doing their level best to increase home prices without doing a damn thing about wages.
It’s collective madness. One of these days, some years down the road, the Democratic Party will start to question whether inflating asset values without concomitant wage growth is really a good idea. But once the “serious” people figure that out, it will already have been years too late to act.
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