Zillow one of the many real estate websites people go to to find listings of available homes is now trying to offload thousands of homes it bought during the pandemic when there was this massive home buying bonanza now why why would they want to do this obviously because they’re losing money with this real estate.
That they now have possession of which just let that sink in for a second okay Zillow managed to lose money in the housing market when the housing housing market is doing tremendously well for people who have the capital to buy houses they’re losing money they’re losing money i mean if that’s not a fail like the biggest fail in business for for the year probably.
So let me let me give you the details this is what happened so in August there was an arms race among tech companies that were trying to buy up as much real estate as possible as housing prices exploded across the country Zillow bet big telling investors that it planned to buy thousands of houses throughout 2021.
It turned its homes division into a billion dollar business so we’ve seen this happen with a number of massive companies right so they’ll buy up single-family residences and they’ll either flip those homes or as private equity firms have showed us they’ll turn them into rentals to essentially corner the rental market.
In this case Zillow was planning on doing this mass flipping operation right where they’ll buy a bunch of homes they’ll sit on them for a while and put them back on the market and then they’ll sell it for an insanely inflated price well apparently they didn’t really think this through so.
As a result as the summer came to an end though it seemed like Zillow‘s offers business was also cooling down in October the company told investors that it would stop buying houses citing construction renovation and closing labor shortages.
Now Bloomberg however speculated that it could also be motivated by excess inventory and reported that Zillow seemed to sell a good number of houses at a loss instead of a profit so what is Big Z planning to do now now zillow is looking to offload around 7 000 of the homes.
It bought now there’s a twist to the story that isn’t so great but let’s just let’s just take a moment to really absorb what we’ve learned and celebrate it because I love seeing them fail in this regard because what zillow and other companies like zillow are doing in order to maximize their profits of course is there taking housing out of an already limited inventory.
We already have a adverse economic situation and most working people in this country already have difficulty affording the homes there buying however when you really think about it the only vehicle in which middle-class americans or working americans that could build wealth in this country was through home ownership.
These kinds of companies including private equity firms have made it more and more difficult throughout the years for that vehicle for wealth building to come to fruition and that enrages me almost more than any other issue in the country right now because it’s also led to there’s a domino effect it’s also led to an increase of people within the rental market.
You look at rental prices and they’ve shot up as a result right because again there’s limited inventory in both the housing market where you can purchase homes and also the rental market now what is the negative twist to the story here it is the rental companies are trying to sell there portfolio of homes to you guessed it institutional investors.
Like wall street firms to the tune of 2.8 billion dollars investors made up about 20 percent percent of the home buying market in 2020 and zillow says that its competitors made up around one percent of the housing market in the second quarter of 2021 a fifth of the housing market is a massive and influential chunk and it absolutely is there’s no other way of putting it.
This trend of institutional buyers okay so the private equity firms the black rocks and all of that they were really empowered by the policies that were passed under the obama administration so when we talk about the lopsided economic recovery following the 2008 recession that was very much the result of policies.
That put wall street first that prioritized the best interests of wall street while essentially screwing over ordinary americans who should have received some sort of relief so their homes weren’t foreclosed on but that’s not what happened so by 2016 as a result of Obama era policies 95 percent of the distressed mortgages on Fannie Mae and freddie mac’s books were auctioned off to wall street investors without any meaningful stipulations.
The private equity firms had acquired more than 200,000 homes in desirable cities and middle class suburban neighborhoods creating a tantalizing new asset class the single-family rental home and the numbers have just gotten worse.
We saw it in the housing market all of us notice it so over the next seven years so starting in 2016 and over the next you know seven years i’m sorry yeah strategic acquisitions culminated into blackstone subsidiary invitation homes making invitation homes the largest single-family rental company in America.
With almost 80 000 homes after Blackstone sold its shares at the end of 2019.
Okay so think about the number of homes just this one private equity firm has and it’s just one you’re seeing copycats popping up doing the same thing that blackstone is engaging in and it’s an absolute disaster for the housing market.
When you consider the already limited inventory of houses and there’s nothing being proposed by Democrats by the way who are in power right now to mitigate this absolutely no regulations no policies.
When it comes to neoliberalism the government only intervenes on behalf of moneyed interests but never on behalf of ordinary American workers and that’s just how this system works so when Democrats are curious as to why people hate them so much and why they’re losing so much support among the working class.
It’s because this kind of garbage happens under their watch due to some of the policies that they pass and they just completely ignore the issue as if it doesn’t exist so you can understand the rage in the country as a result.
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