Friday Update August 27, 2021

655 existing single family homes on the market this week, about 24 more than last week.  And every house I showed yesterday had other buyers there with us.  So no, it's not a buyers market yet, still, or at all.  

1342 sales so far in August for a median price of $445,000.  Steady as she goes.

Interest rates have been pretty level with the 10 year treasury notes in a range of around 1.3%.  Steady interest rates are fun because they're so boring.  You get a little bit of certainty, and with some certainty in the market you get steady and strong sales figures like we've been seeing.  

Yesterday, pretty late at night, the SCOTUS struck down the CDC's eviction moratorium.  In a 6-3 party line vote the judges basically said if congress wants to extend the moratorium then they can vote on it and do whatever.  But without approval from congress the CDC has no authority to stop all evictions nationwide.  Hmmmmm, no shit.  It's as if the center for disease control is supposed to focus on controlling diseases, not rents.

Now will this mean that a "wave of evictions" will come crushing hard working Americans leading to an apocalypse in the housing market and in homelessness?  Or are several tens, maybe hundreds of thousands of deadbeats going to have to move in with their relatives or find room mates?

 I'm going with option 2 here.  The thing about the people that are being protected by this eviction moratorium (largely) is that the only economic consequence to them being evicted is going to be a positive one.  You see they will either figure their life out or continue to suck.  That's very much a personal choice no government agency can make for them.  Meanwhile the rental unit they've been essentially squatting in can go back on the market and be rented out to one of the many, many hard working and awesome people that have been struggling to find a place to live.  Landlords will probably have to fix up some of these units which will create short term work for other hard working people, and the landlords will once again be able to pay their mortgages which will contribute to the liquidity of the entire system.  A lack of liquidity means a lack of affordability guys, don't sleep on that.

Maybe some landlords will throw their hands up in frustration and sell their properties, maybe that will help with our inventory levels a little bit.  Ultimately in such a low interest rate environment there are too many investors and buyers in general for a small number of trashed out rentals to trash the market as a whole.  Honestly it would be a welcome sight to have some of these shittier rentals get scooped up and remodeled.  I'm sure the neighbors to Doug Bruce's properties would agree.  Sue me bud, it's only libel if I was lying.

Forbearances.  Certainly a wave of forbearances should crush the real estate market and finally allow all the geniuses who have been paying rent since 2009 to get a "good deal".  Well I doubt it.  There is so much pent up investor demand both at the individual and the corporate level that any of the 1.5 million homes currently in forbearance that do hit the market at a discount are going to get bid up to market value.  Hey and if that doesn't work then maybe Zillow will just buy it!  

Why?  Because we're in the midst of creating kind of a high tech feudal society here.  The lords own everything thanks to what is probably the easiest monetary policy ever, and all the peasants get to finance really nice cars and park them in the garage of their rental.  You could like live within your means and save up for a down payment and then you could also take advantage of the leverage that owning assets brings you.  But at the same time you could ball out 3 trade ins deep on your car payment and have your $1200/month car keep you poor for the rest of your life.  The cool thing about poverty is that it's not mandatory in America, the uncool thing is that it's hard to break out of it and most people don't.  And the other thing is that the people and companies with a whole lot of money know this and are doing everything they can to capitalize on it.

We do have an alternative system where housing can be a human right.  In the USSR for example every citizen was guaranteed housing.  The caveat here is that maybe 4 families shared a 4 bedroom apartment and 1 kitchen.  Or maybe you lived in like a dormitory type of setup.  Or if you were fortunate maybe you got to live in one of the thousands of projects that still make up the majority of the suburbs in Eastern Europe.  Hey it's not fancy, but it is housing.  The only downside is you never owned the property and if you didn't contribute to the state then the state may relocate you to a different type of housing like a forced labor camp.  Think of it as a commune where you get to learn the values of hard work and maybe die in the process.

That's an extreme example.  We do need more affordable housing and we need local housing authorities to nut up and think more like investors than social workers.  Our local housing authority right now owns about 1,100 units, has partnerships with developers on a little over 1,000 affordable units that provide tax credits back to the developers, and issue roughly 2,400 section 8 vouchers that go to private landlords.  The section 8 money is appropriated by state and federal governments and is finite, which is the reason there is like 4-5 year waiting list to get in.

The section 8 model is also based on the market rates of local housing.  So the more expensive the area gets, the more money it takes to keep the same number of section 8 tenants housed, therefore putting more strain on that system.  And ultimately that government cheese ends up in the pockets of private investors.  Nothing really wrong with that, it's just that the housing authority has no say in how to keep rents affordable.

Now imagine a model where private investors are able to invest their money into affordable housing.  The crazy thing is that it exists in other communities and is one part of the solution, not the whole solution.

You have funds like these in different areas like this one for example is in Minneapolis, there is a similar one in Nashville, and I'm sure a number of other communities too.  The concept is that the housing authority is able to use the money of private investors to accumulate properties.  By owning the units they're able to control the rent however they see fit as opposed to being controlled by the market.  I'm not going to get into tax reasons and appreciation but bottom line is that just like an individual, if a housing authority is able to own their inventory they then get all the benefits of leverage that can be used to create more affordable housing.

This is getting kind of long and I need to go show properties to investors and regular people alike.  The jist of this whole thing is that regardless of how hard of unfair this system can be the solution to it is ownership.  I personally think that the roughly 66% home ownership rate in the US is a solid D, and is unacceptable.  I think individuals need to make homeownership a priority as a hedge against the rest of the financial world which is constantly trying to get into your pockets.  Be a lord yo, don't choose to be a peasant.  

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