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Vanguard and Wall Street Are Pumping Global Housing Markets

Cherry-picking data deflects from the real issue of the Housing Affordability Crises.

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There are several factors influencing the housing affordability crisis, but don’t get it twisted: There is one huge, greedy elephant in the room. The rest is just confetti.

Despite what prestigious media outlets say, the housing affordability crisis is unequivocally the product of Wall Street’s, with a special shout out to Blackrock and Vanguard, voracious greed.

To cover their tracks, they have consistently used the reputable sources they own a controlling stake in as mouth pieces to deflect attention away from what they are doing.

But peeling back the layers just a little bit reveals quite a stinky center. Here we’ll break down exactly why Blackrock, Vanguard, and other greedy Wall Street “investment” firms really are “the boogeyman” when it comes to housing affordability.

Where it all began

About two years ago, investment firms started aggressively buying up residential housing units—the ones Millennials would have entered the market with.

As everyone knows, housing prices soared. The Federal Reserve’s own data reported that between the beginning of 2020 and now—just over two years later—average home sales prices increased by nearly 25%.

Reports came in that at nearly every home sale transaction, some high roller was coming in and making cash offer, 10, 20, sometimes even 30% above asking price. That high roller was Wall Street.

It’s important to understand that firstly, Wall Street already owns a lot of homes. Secondly, a few million is not a lot of money to multi billion dollar investment “firms.”

If you owe 100 properties and have a lot of cash, why not go into a tight market and drive up the cost by overbidding? Sure, you pay more for that particular unit, but do it enough times, and the market rate for houses in the area goes up. That means every property in your portfolio goes up, more than offsetting the amount you overpaid for a particular unit.

An institution might overpay say, $5 million dollars in bidding wars for 100 properties in a given city – but if they already own 1000 units in that city, all of which go up $50,000 due to bidding wars at every sale, then they are up $45 million dollars.

Find a scapegoat

Of course, it’s a bad look when Wall Street purposely inflates the costs of critical resources, like housing. In order to deflect protests and pubic ire, they need to deflect attention.

Highly consolidated, grossly wealthy Wall Street firms like Blackrock and Vanguard are the largest shareholders in major media outlets through their ownership of media conglomerates like Comcast, among others. Vanguard holds the largest share amount in Comcast while Blackrock owns the third highest share percentage.

That explains the following story:

Vox Media defends Blackrock pumping the housing market

Vanguard is also the top shareholder in Apple; Blackrock the third largest. Therefore, the financial interests of Balckrock, Vanguard, and Apple are aligned.

Well it just so happens that Steve Jobs’ widow, Laurene Powell Jobs, is also the majority stakeholder in the prestigious magazine The Atlantic. That explains how articles like this get published.

Screenshot of the Atlantic defending Blackrock's housing pump

We should all be grateful that they put a journalist from a nation-leading publication on the beat about whether or not the nation’s largest wealth holders were being falsely accused. Because that would be a real crisis.

They weren’t.

Cherry-picking data

But, let’s hear them out.

In Derek Thompson’s piece in the Atlantic, he brings up some compelling data to defend poor old Blackrock, who’s just trying to make trillion of dollars through grit and resilience.

“The U.S. has roughly 140 million housing units, a broad category that includes mansions, tiny townhouses, and apartments of all sizes. Of those 140 million units, about 80 million are stand-alone single-family homes. Of those 80 million, about 15 million are rental properties. Of those 15 million single-family rentals, institutional investors own about 300,000; most of the rest are owned by individual landlords. Of that 300,000, BlackRock—largely through its investment in the real-estate rental company Invitation Homes—owns about 80,000,” Thompson writes.

Well, numbers don’t lie. But they can easily mislead.

Sure, 80,000 houses out of 140 million is barely a drop in the bucket.

Eighty thousand is not a lot relative to all the housing units in the U.S., but it is a huge percent of the total number of homes on the market. Houses that are not for sale, are not part of the equation. Housing prices are set by sales—not occupied homes.

That changes the math significantly.

Let’s instead compare this figure to houses actively for sale in the ten biggest U.S. cities by population based on Zillow listings:

Number of Zillow listings in top 10 U.S. metropolises (by population) at the time of this writing:

  1. NYC: 23,705
  2. Los Angeles: 4,564
  3. Chicago: 762
  4. Houston: 6,067
  5. Phoenix: 1,925
  6. Philadelphia: 5,260
  7. San Antonio: 3,982
  8. San Diego: 1,060
  9. Dallas: 2,357
  10. San Jose: 1,541

As of the date this article was published, the top ten largest cities in the U.S. by population collectively have 51,223 housing units for sale on Zillow.

Now 80,000 isn’t so insignificant.

Additionally, Invitation Homes isn’t the only institutional investor buying property.

Last year, Zillow’s algorithm accidentally “overbought” 7,000 homes — nearly $3 billion dollars worth.

It bears repeating: One company, in one year, bought more than the total number of homes currently listed on Zillow in Los Angeles, Chicago, and San Diego combined.by accident.

Of course, that figure does not include the number of houses Zillow bought in that same year on purpose.

Now consider that AirBnB has over 660,000 housing units in the U.S.—more than 1250% more than the combined total of current for-sale units in the top 10 largest cities. These properties are primarily for short-term rental income or longer-term leases that are raised every year.

Just Invitation Home’s portfolio and Zillow’s overbuying represent 156% of the total number of housing units for sales in the top ten largest U.S. cities combined.

Surprise: Vanguard is the second largest shareholder in AirBnB.

Between just those three “institutional investors,” they are directly profiting from buying up property and converting it to income-generating assets while housing affordability crises is hitting even high-earning professionals and homelessness rates skyrocket.

Shot term rentals need to be capped to people under a certain net worth. Primary residence sales need to be prioritized.

People need to live in homes more than investors need to improve their yields, or capitalism has failed to meet the needs of society and needs to be reexamined.

Of course, there’s also the option of converting empty office spaces into housing units. If Blackrock and Vanguard aren’t the boogeyman as they are forcing the prestigious publications to say, they can get to the very important work of addressing these critical issues whose breaking points will be catastrophic, and are closer than they might seem.

The Atlantic and Vox media both do quality journalism. However, media is an expensive business. That means nearly every publication in the U.S. is beholden to some interest. Vanguard and Blackrock are the largest shareholders in some of the largest media companies in the nation.

We cannot forget that when reading their coverage, particularly when it comes to their primary stakeholders.

So yes, Vanguard, Blackrock, Invitation Homes, and other Wall Street firms are indeed driving up housing prices. In doing so, they are pumping the values of their own portfolios by forcing bidding wars at every transaction.

And leaving younger generations with nothing but hopelessness and apathy.

Author

  • Tanja Fijalkowski is an award-winning writer, editor, and designer. A North Bay Area native, she has written for various financial, business, history, and science publications. She's a deep-dive researcher with a strong command of data analysis and simplifying complex concepts.

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