How Hillary is Already Complicit with the Next Subprime Real Estate Bubble
Holly Wood, PhD 🌹
23620

Without getting into the politics of your article, I would like to point out some facts which show a glaring lack of basic economic or financial knowledge on your part. According to your note Blackstone owns 40,000 homes, to put that into perspective the current base of single family homes in the US (US Census Bureau data) is nearly 70 million (that number does not include multi-family or mobile homes), so they own a TINY insignificant 0.057% of all single family homes in the US- basically zero percent. In 2015 housing starts totaled almost 1,500,000 new homes, Blackstone’s “vast” inventory amounts to only 2.67% of all new homes built in a single year, again basically nothing. I think you are grossly overstating the impact of private investor ownership of homes, even 200,000 out of 70 million is only 0.286%, that’s less than one third of one percent- again basically zero! In my view, based on the scale of numbers, your fear of a future financial crisis from this product is way off the mark. Its also worth noting, that few organizations are current buyers of homes.

So what might it have looked like if a firm like Blackstone had not stepped in to buy homes that were in foreclosure, defaulted on or abandoned- think Detroit, think disrepair, think neighborhood blight, think negative financial impact on all the surrounding homes. It would have been bad, the housing crisis would likely have lingered longer as all those homes would have sat there waiting for someone to buy them or tax payers pay to knock them down as in Detroit. Basic economics- supply and demand, Blackstone and its ilk helped clear the market, it was a good thing.

Your comment “But buying houses cheap and then waiting for them to appreciate isn’t the only way Blackstone is making money on these deals. It wants your rent check, too.” What are you suggesting otherwise? The homes sit empty or they let people live in them for free? Clearly Blackstone isn’t forcing people to rent those homes, people rent them because they want to, they chose to!

Its important to understand that entities like Blackstone and others mostly manage money for Pensions, Endowments and Foundations. High Net Worth Individuals make up only a small part of their assets under management (“their” being generic to the money management industry). Who benefits from such entities? Certainly rich people do, but so do thousands and thousands of organizations who invest on behalf of millions of their employees via pension funds, including the likes of school teachers, union plumbers/electricians, firemen, to kids benefiting from college financial aid and even museum and hospital endowments also gain, just to name a few.

As to those who are to blame for the housing crisis, its easy to point a finger at the big evil banks, but that's far too simple and frankly not fully correct. The list is long and vast. You start with President Bush, actually the process began before then with President Clinton and Congress who directed the agency that oversaw Freddie Mac and Fanny Mae to lessen mortgage qualification requirements makeing it easier for people to get mortgages and increase home ownership. It also includes then Fed Chairman, Alan Greenspan, who failed to appropriately act or utilize the tools and regulations at his disposal to correctly monitor banks, as well as the local real estate broker and property appraisers who sold and justified the prices of homes they sold, the mortgage brokers who gave promises they couldn't make, much less keep, the people who took out mortgages without understanding what they were signing, the housing speculators betting on the bigger fool theory, the banks that allowed no documentation loans and finally all those consumers who used their homes as piggy-banks allowing them to spend and live above their means. No doubt there were bad actors, but the list of complicit offenders is huge!

Allow me to mention two other issues not associated directly with your comments, but I think relevant in this political climate.

$15 minimum wage- the increased cost needs to be paid for somehow, for government works that would be via diversion from other areas (like road repair), higher taxes or improved productivity (read fewer workers), In the private sector it would be via higher prices for goods and services (higher cost to the consumer) or improved productivity (fewer workers). In effect its a transfer of money from some people to some other people. I’m not expressing a view on this, simply an explanation that someone has to pay for someone else to benefit- money isn't created out of air.

Walmart- that evil company that puts Mom’s and Pop’s out of business. The reality is, its their very own neighbors who drive to Walmart. No one forces anyone to shop at Walmart, its a choice people make, they want cheap goods. But there is a cost, and its those family owned business who pay the price. In reality its bigger than that, its also the family owned business that make the things we buy. You want a 46" flat screen TV for $1200, its not going to happen when you need to pay a worker $20–30/hr (including taxes and benefits). The cost of components that go into things generally go down over time due to innovation and/or volume, labor costs generally go up over time- so the only variable is higher productivity (fewer people) and/or cheaper labor. If society wants more high paying jobs in the US, then people need to recognize that they will need to pay more for the same. I’m not aware of how you can raise the price of labor while holding the price of a product constant-unless of course we do away with profits and that’s a whole other issue.

Thanks

Show your support

Clapping shows how much you appreciated hrld2006’s story.