The US housing market has been a leading indicator of the economy for years. Recent data suggests a decline in demand, which may signal economic trouble ahead. Rising inequality and a lack of affordable housing are also pressing issues.

While the single-family rental industry may have emerged from the 2008 financial crisis, lawmakers are now calling for limits on institutional investors’ control of this market. Radical measures, such as those announced in Portugal, may be necessary to tackle the housing crisis and prevent investors from driving up prices.

The US housing market has been a reliable indicator of the country’s economic performance for years. Recent data shows a worrying trend, with median sale prices down by 13% from the previous year, investor purchases down by 46% in the fourth quarter of 2022, mortgage applications down by 41% from 2022, and housing starts down by 21% from 2022. These figures suggest a decline in demand and may signal economic trouble ahead.

Rising Share of Secondary-home and Investment-property Buyers

Real estate data shows that secondary-home and investment-property buyers are becoming a larger share of homebuyers in major US cities. However, experts warn that these deep-pocketed shoppers are muscling out first-time homebuyers. This trend could exacerbate inequality and further widen the gap between homeowners and those forced to remain tenants.

The Housing Market Loses the Most Value Since 2008

The US housing market just lost the most value since 2008, driven by higher interest rates that have dampened demand in the formerly red-hot housing market. Mortgage applications to buy a house have collapsed to a level not seen in 28 years, down 41% from the previous year. The situation is likely to be temporary, according to a Fannie Mae report, but it remains a worrying sign for the economy.

Radical Plans to Tackle Housing Crisis in Portugal

The Portuguese government has announced radical plans to tackle the housing crisis, including forcing all unoccupied homes to be put on the market at affordable prices. Rental prices will also be capped, and “tourist apartments” will be prohibited. These measures aim to increase the supply of affordable housing and prevent investors from driving up prices.

Institutional Investors and Single-family Rental Homes

Institutional investors, including private equity firms such as Blackstone and investment managers such as Pretium Partners, may control 40% of US single-family rental homes by 2030, according to MetLife Investment Management. However, a group of Washington, D.C., lawmakers, including Rep. Ro Khanna, is pushing back against this trend, arguing that private equity firms are using tax dollars to buy up single-family homes and that this practice is contributing to inequality.

The Single-family Rental Industry: A Legacy of the 2008 Financial Crisis

The single-family rental industry got its start with government backing in the aftermath of the 2008 financial crisis. This was a rare opportunity for institutional investors to build a portfolio out of foreclosed properties. Since then, companies such as Tricon Residential, Progress Residential, American Homes 4 Rent, and Invitation Homes have bought thousands of homes and added to the housing supply in some cases.

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