Trending Now :

The US Housing Market Is Booming. Is a Crash Ahead? Financial Literacy: How to Be Smart with Your Money Non-Fungible Token (NFT):EXPLAINED SKYROCKETED CEO PAY & LONG LINES AT FOOD BANKS Amazon Workers Want to Unionize Another Major City Piloted Universal Basic Income The New Bubble: SPACs SUBMIT YOUR PPP ROUND 2 APPLICATION BEFORE MARCH 31ST Robinhood-GameStop Hearing & Payment for Order Flow Guess Who’s Coming to Main Street Democratic Senators Say No to $15 Minimum Wage BEZOS OUT! President Biden Most Impressive Act Went Unnoticed: CFPB Biden $1.9 Trillion Stimulus Package 2021 IPO DRAFT CLASS: Ranking the Top 10 Prospects $25 Billion Emergency Rental Assistance NO, TESLA IS NOT WORTH MORE THAN TOYOTA, VOLKSWAGEN, HYUNDAI, GM, AND FORD PUT TOGETHER AMAZON TO HAND OUT ITS WORKERS $300 HOLIDAY BONUS Where Does the American Middle-class stand on Student Debt Relief? Joe Biden’s Economic Plan Explained 4 TYPES OF BAD CREDIT REPORTS AND HOW TO FIX THEM What Is the Proper Approach to Not Buy Too Much House? FISCAL STIMULUS PLANS STILL IN ACTION How to Pick Investments for Your 401(k) 10 Simple Ways to Manage Your Money Better All You Need to Know about Reverse Mortgage All You Need to Know about Wholesale Real Estate Credit card Teaser Rates AVERAGE CREDIT CARD INTEREST RATE SURGES TO 20.5 Percent Trump Signs 4 Executive Orders for Coronavirus Economic Relief The Worst American Economy in History WHY CREDIT CARDS MINIMUM PAYMENTS ARE SO LOW? 10 BIGGEST COMPANIES IN AMERICA AND WHO OWNS THEM White House Wants to End the Extra $600-A-Week Unemployment  10 Countries That Penalize Savers FEWER CREDIT CARD BALANCE-TRANSFER OFFERS ARE IN YOUR MAILBOX Private Payrolls and the Unemployment Rate SHOULD YOU BUY INTO THE HOUSING MARKET RESILIENCY? WILL WE GET A SECOND STIMULUS CHECK The Child Tax Credit and Earned Income Tax Credit THE RETURN OF BUSINESS CYCLES Should You Request a Participant Loan or an Early 401(k) Withdrawal? Homebuyers Should Not Worry about Strict Mortgage Borrowing Standards The Potential Unintended Consequences of Mortgage Forbearance All Business Owners Need to Know about the Paycheck Protection Program 10 MILLION UNEMPLOYMENT CLAIMS IN TWO WEEKS HOW WILL THE GLOBAL MIDDLE-CLASS RECOVER FROM A SECOND ECONOMIC RECESSION IN A DECADE? WILL U.S. CONSUMERS CONTINUE TO SPEND? HOW’S YOUR 401(k) PRESIDENT TRUMP SIGNS $2.2 TRILLION CORONAVIRUS STIMULUS BILL MIDDLE-CLASS NIGHTMARE: MORE THAN 3.3 AMERICAN FILED FOR UNEMPLOYMENT CLAIMS IN THE US LAST WEEK. LAWMAKERS AGREED ON $2 TRILLION CORONAVIRUS STIMULUS DEAL CORONAVIRUS STIMULUS PACKAGE FAILED AGAIN IN THE SENATE APRIL 15 (TAX DAY) DELAYED DEMOCRATS AND REPUBLICANS DIFFER ON HOW $2 TRILLION OF YOUR TAX MONEY SHOULD BE SPENT YOU CAN DELAY MORTGAGE PAYMENTS UP TO 1 YEAR, BUT SHOULD YOU? 110 Million American Consumers Could See Their Credit Scores Change The Middle-Class Needs to Support Elizabeth Warren’s Bankruptcy Plan The SECURE Act & Stretch IRA: 5 Key Retirement Changes 5 Best Blue-chip Dividend Stocks for 2020 9 Common Bankruptcy Myths 401(K) BLUNDERS TO AVOID Government Policies Built and Destroyed America’s Middle-Class & JCPenney Elijah E. Cummings, Esteemed Democrat Who Led the Impeachment Inquiry into Trump, Dies at 68 12 Candidates One-stage: Who Championed Middle-Class Policies the Most WeWork: From Roadshow to Bankruptcy Stand with the United Auto Workers Formal impeachment Inquiry into President Donald Trump America Is Still a Middle-Class Country SAUDI OIL ATTACKS: All YOU NEED TO KNOW THE FEDERAL RESERVE ABOLISHED BUSINESS CYCLES AUTO WORKERS GO ON STRIKE Saudi Attacks Send Oil Prices Spiraling REMEMBERING 9/11 What to Expect from the 116th Congress after Their August Recess Should You Accept the Pain of Trump’s Trade War? 45th G7 Summit-President Macron Leads Summit No More Upper-Class Tax Cuts Mr. President! APPLE CARD IS HERE-SHOULD YOU APPLY? THE GIG ECONOMY CREATES A PERMANENT UNDERCLASS 5 REASONS IT’S SO HARD FOR LOW-INCOME INDIVIDUALS TO MOVE UP TO THE MIDDLE CLASS ARE YOU PART OF THE MIDDLE CLASS? USE THIS CALCULATOR TO FIND OUT? WELLS FARGO IS A DANGER TO THE MIDDLE CLASS The Financialization of Everything Is Killing the Middle Class
The housing market
American Middle Class

The Middle Class Is Being Priced out-of-the Housing Market

The housing market is booming.  Sales of new homes skyrocketed to 4.8 percent in August, which is the fastest pace since 2006.  Private equity firms are going to the suburbs and buying single-family homes, then rent them out.  As a result, the middle class is being priced out of the market.

The Financial Crisis of 2008 gave birth to the single-family home rental industry.  At the lowest point of the subprime mortgage crisis, companies such as American Homes 4 Rent, Blackrock, and Invitation Homes gobbled up thousands of distressed and foreclosed single-family homes and turned them into rental properties.  Sometimes they event rent the houses back to former-owners in sale-leaseback transactions.  

A decade-plus after the birth of the industry, Invitation Homes and American Homes 4 Rent are big publicly traded companies, with $15.46 and $8.75 billion market capitalization, respectively.

Over the past six months, millions of Americans lost their job, and mortgage lenders tightened lending standards.  The pandemic-induced economic downturn should have put some stress on the housing market, but it has been unexpectedly resilient.  

Wall Street firms, not the middle class, are the benefactors of the housing market, dizzying growth.

The Middle Class is Priced out-of-the Housing Market.

The companies mentioned above and many more continue to buy single-family homes to turn into rentals. Their business model creates a historic housing supply shortage, which pushes house prices up and up.  

For example,  Invitation Homes currently has 224 single-family homes available for rent in South Florida. One of the houses available for rent in Miami is a 2,200 square feet home with three bedrooms and two bathrooms for $3,469. 

South Florida, along with multiple other metros in the country, is experiencing a severe housing affordability crisis.

According to the Zillow, the median home value of single-family homes and condos in the United States ins $256,663. Home values have gone up 5.1% over the past year.

Even though mortgage rates are at their lowest levels in history, middle-class buyers can’t buy homes, especially first-time homebuyers.  As of this writing, the benchmark 30-year fixed mortgage rate is 3.090% with an APR of 3.300%. The average 15-year fixed mortgage rate is 2.550%, with an APR of 2.770%.   However, the supply shortage is preventing middle-class buyers from taking advantage of the cheap mortgage.

In a regular housing economy, a young couple would buy a start-up home, move into a bigger one when they start making more money, and then downgrade for a smaller home at retirement. That process continues to add more supply to the housing market.

The single-family home rental industry stops that healthy economic process because they buy and hoard single-family homes.

BACK TO TOP
Author

Editorial Fellow for Contributors and Partnerships.

Continue Reading
Click to comment

Leave Comment

Advertisement
American Middle Class / May 22, 2021

What to Make of America’s Inflation Spike?

Since the late 1920’s when statistics began to be officially compiled, the US inflation rate...

American Middle Class / May 09, 2021

How to Use Credit Cards Wisely

Lenders want you to be creditworthy before they can finance that house, car, or new...

American Middle Class / May 02, 2021

Time to Start Paying Back the Covid-19 Hardship Withdrawal

Covid-19 hardship withdrawal was made possible by the Coronavirus Aid, Relief, and Economic Security (CARES)...