Krystal Ball: The Next Housing CRISIS Is Here And The Villains Are Exactly Who You'd Expect

[Music] all right crystal what's on your radar hello friends i've got a question for you this morning what do you think about this house it's a modest ranch built in 1948 in the maryland suburbs of dc four bedrooms two baths about 1800 square feet needless to say seen better days nothing's been updated kitchen and bathroom still the original from the 40s the realtor's description says in part this is an estate home in need of some serious love being sold strictly as is please do not go out on the deck it is not safe so this dilapidated modest house was listed for what to me already seemed like a hefty sum of 275 000 but improbably it sparked an absolute feeding frenzy 88 offers later 76 of which were all in cash the house sold for nearly half a million dollars it went for 460k that's 70 percent higher than the original list price all to be the proud owner of a suburban property that is currently dangerous and unlivable the winning bidder was not actually the highest offer but they were totally in cash and they had all the paperwork ready to go so this type of home in a suburban area it should reasonably be a kind of a starter home maybe for a young couple with the energy to fix it up but what young couple has half a million dollars in cash just laying around that is insane now this particular home might be a bit of an outlier but there is no denying the fact that the housing market has been blazing hot especially for the upper middle class now the media has covered part of that story affluent professionals during coronavirus they started prioritizing some different things they wanted a home office space more outdoor areas with remote work of course proximity to the office became less critical at the same time these affluent workers they fared really well during the pandemic they cut back on expenses and availed themselves of pandemic era programs but they were able to stay in their lucrative jobs unlike the working class that was of course screwed over in basically every imaginable way but now we are learning that the housing boom and possible bubble is being driven not only or maybe not even primarily by the pmc wanting more gardening space permanent capital is buying up homes at astonishing rates take a look at this new report from the wall street journal if you sell a house these days the buyer might be a pension fund wall street journal weirdly focus their headline on pension funds because i guess they're associated with workers but the truth is it's all sorts of rich people in their financial institutions that are buying up american communities the report quotes a real estate consultant who estimates that one in five houses in the u.s is sold to someone who never moves in that same analyst told the wall street journal you now have permanent capital competing with a young couple trying to buy a house that's going to make us housing permanently more expensive private equity giants hedge funds and other economic royalists are buying up houses in some cases entire neighborhoods and then they're either getting directly into the landlord business or they're flipping them to entities that will rent the suburban american dream to you as a result home prices have jumped 16 percent nationwide in a single year in the northeast and the west the increase has been even wilder with prices jumping 21 year over year does that sound to you like the type of healthy growth that's going to lead to vibrant and sustainable communities of course not it's another disaster in the making best case scenario is that the prices just continue to go up indefinitely which is great if you already own a home and great if you're a wealthy investor but a disaster if you are anyone trying to buy a home for the first time and not being able to buy a home is a disaster because it's basically the only remaining path to building any sort of stable wealth in an era of privatization 401ks and cobra instead you'll be doomed to have some private equity goon as your landlord applying their harvard education and come up with new ways to squeeze every penny they possibly can out of you they get to build and build and build their wealth and you never do testimonials from the families already living this nightmare are predictably horrible distant corporate landlords who do nothing as porches collapse pipes burst and mildew grows tenants with no recourse and no options who are stuck in hazardous homes the slum lord of yore replaced with some of america's wealthiest institutions but with the end result exactly the same so that's the best case scenario the worst case scenario it's another dangerous speculative bubble sure market's hot right now so everyone's buying buying buying with all cash offers gobbling up whatever they possibly can but at some point the music stops the gains reverse even if only by a little bit and all the big players who bought in big rush for the exits to try to avoid being the ones left holding the bag they dumped their inventory back in the market dropping prices ordinary homeowners who took out giant mortgages to desperately grasp for that american dream watch their home prices plummet leaving them upside down and totally screwed i'll give you one guess as to whether it will be the big guys or the homeowners who will get bailed out as one sociologist at the london school of economics put it the story of housing in 21st century america financialization leads to crisis which fuels more financialization which leads to more crisis which fuels even more financialization every new crisis it's just an opportunity for the economic royalists to come in and gobble up even more of the pie the people who manage to hold on to their nice homes in good communities become even more zealous about protecting their precarious privileges lest they or their kids fall into the permanent grind of the renter class it's the american dream brought to you by blackrock and sagar this story is pretty shocking and also i want to give a lot of credit here to david dayan yep and to us because this is something we've been tracking from the very beginning for over a year now basically the fallout from the last crisis was that the federal government pushed a lot of these entities to get in the business of buying up distressed homes that turned them into the landlord business and so every time there's a crisis even when these financial institutions are the ones that create the crisis they also stand to be the ones who ultimately benefit and around and around we go yeah and uh as you know i'm personally very struck by this radar because of unexpectedly getting kicked out of my house because my landlord decided for you so i'm like in the process of searching and this story is actually reverberating through washington circles because basically unless you've got like 900 grand in the bank as a normal person does you can't buy a house period like they want cash only at 25 above asking price anywhere in the washington area so good luck unless you're literally in the top 0.01 percent which means what which means that the bank becomes your landlord and it's funny i found some neoliberals online who are reacting to this and then what's the problem it increases the housing stock you know it's not just about housing you know what the problem is you don't want blackrock to be everybody's landlord and just kick you out on your ass anytime they decide or what if the market goes south and they have to sell it to some other like japanese investor group and then they become your landlord oh and by the way that's the only way that you actually accumulate any intergenerational wealth in america but you know it's all good because people have you know access to housing through rent that's insane and again look obviously the federal government you know and the federal government the banks and all these people 2008 in terms of encouraging people to buy housing etc was irresponsible but in the current moment there is obviously something to the american dream at the ability to accumulate some sort of wealth period in a normal housing market we all found that out the hard way back in 2008 and if you look at it at this point how are you supposed to compete if you have student debt or if you have any sort of payment at all which almost every millennial in this country does what you how are you going to get money in the bank you can't even put a down payment and at this point down payments don't even matter because you're competing with blackrock and jpm for jp morgan in order to pay outright cash 20 above asking and then even when it crashes it's not like it's gonna be there for you you think the banks are gonna give you because you're based on your credit or whatever they're gonna give you a loan no it's the same it's the same scam over and over and over again exactly right last time around rather than keeping homeowners in their houses they did nothing they let everyone get foreclosed on oftentimes through sketchy and fraudulent means by the way where they shouldn't even have appropriately been foreclosed on but they were and then encouraged that all of these companies to get in the business of being landlords and buying up all this stock and you can just see it building again look some of this is organic some of you know there's a class of people who did really well during the pandemic the class of people are looking for you know to move around to get more space move further out into the suburbs or the excerpts because they don't have to get into the office every week some of it is organic but there is certainly a portion of it that is just completely speculative i mean it's just completely gambling market's hot let's get in let's buy up i kept thinking about two we um covered here this uh i don't know if this interview posted yet the bill huang thing is that posting on friday yesterday anyway we talked about this it's gonna post on friday um this company that because they'd had gotten so over leveraged into viacom cbs right right the minute that the stock price went down even a little bit they were hosed and so even if the housing market if you are what exposed in a massive way in the housing market and sometimes it's hard to tell on a balance sheet because this all gets financialized and very esoteric very opaque then when it starts to drop even a little bit there's a panic you got to sell you got to be able to cover and that can have ripple effects throughout the economy and that's part of what we've seen over and over and over again is when these big players get involved in a big way it creates a house of cards kind of a dynamic so that's a real risk here and you just know however this ends up ordinary people are going to get screwed whether the prices keep going up indefinitely or whether you have a bubble that bursts and there's a crash it's going to be bad for ordinary people and i think you're right to point to as well there's a generational dynamic here as too because if you were a boomer or potentially gen x and you were able to get into the housing market you got it in the 90s they're all good they're selling at 40 50. they're in great shape sell the home maybe downsize move somewhere for retirement great shape meanwhile especially younger millennials and forget about it gen z are you know how are they ever going to be able to touch a home and again our society could be structured in a way where wealth building was not so tied to your house but that is the society we have right now yeah it's just a tragedy all right sagar looking forward to your radar that's next

Channel: The Hill

Views: 2,156,932

Rating: 4.7796855 out of 5

Keywords: Rising, Krystal Ball, Saagar Enjeti, Progressive, Progressive Politics, Democrats, Democratic Party, Republicans, GOP, Republican Party, Housing Market, Renting, Landlords, Investor, Capitalism

Id: EBb9zf_zWvU

Length: 10min 55sec (655 seconds)

Published: Tue Apr 06 2021

Reddit Comments

[u/Shr00my78]

Stripers with adjustable rate mortgages on 5 homes and a condo?

[u/Angelaira74]

I worked for one of these companies. They had billions of dollars and an entire staff who did nothing all day except make offers on homes. In the afternoons we would review the inspections for any possible issues with the homes and lower the initial offers. Usually as close to close as possible so the homeowners would cave. They were buying in many cities nationwide, simultaneously. We would also field complaint calls from renters, and just do the bare minimum to make them happy. They also had a complete remodel team in each city to go in and make the home pretty enough to rent. It was pure profit from every side. No one could explain where the money was coming from or where the profits were going, but it was high pressure to get the offers written and sent out every morning. Usually around fifty offers per person in that office.

[u/E-ntertainment720]

“Take home pay is level. Home prices are flying that means homes are debts not assets.” - Michael burry

[u/Ih8TB12]

Zillow has started buying and renting homes. I was looking to relocate to get closer to work and saw shit houses that needed tons of work disappear above asking price in days. I didn't even get a chance to look at the property - I just gave up. Hoping MOASS will allow me to leave my job and not have to drive an hour everyday.

[u/regular-cake]

Have you read The everything short - The mortgage edition?

[u/regular-cake]

Damn... this is like exactly what I've been worrying about! Fuck it I'm going in on tiny home futures anyways

[u/WhyArePipesSoEvil]

What is UP with the Hill? I thought they were like super conservative, but this is just super based and woke! Is the Hill actually a real news source? Making me teary eyed about the future. Hey Hill, if you're listening, we gorillas will pay you double what your current owners are if you stick to pieces like this and don't take bribes! Except from us...

[u/SaltyRemz]

I’m not from America so idk shit, but if this aired and it’s so obvious ( I know it’s bs and unfair ) if this did air why tf does the law or the government not do anything ? It’s absolute bs, then the government cries about crime rates, fraud and shit come on... normal person does something minor and he gets jailed but some scumbag millionaires rob millions of people and get a fine of about 100k and that’s about it while he pays his fine he probably makes 10 times the amount of the fine... come on this is sad and sickening

Sorry fir the rant it’s just disgusting to watch... I’m just a student almost graduating and I’m looking to be in the rat race for the rest of my life... bs I really hope gme puts me and everyone else where we all deserve to be! Peace out✌🏼✌🏼

[u/oomuzaffe]

I’ve just accepted that I’m never buying a home.... I’m going to build one (someday) instead!!!!