Why We Have a Shortage of Homes Part 2

January 14, 2022
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The massive shortgage of single family homes since the market crash, a deficit of 9.7 million homes over the last 13 years has pushed institutional investors heavily into the rental home market. Investors are finding real estate as the safe play for their investment money. The 3 largest Invitation Homes, American Homes 4 Rent and Progress Residential account for ownership of 155,000 homes, and their buying continues, muscling out young home buyers in the entry and mid level markets. REIT's (Real Estate Investment Trust) are a vehicle that is being used to acquire a lot of these properties. To REIT's a house is a consumption good, not an investment, particularly when financed with a sizable mortgage. It does not produce current income, but rather requires regular mortgage interest, real estate tax, insurance payments and maintenance costs. In contrast, REITs represent investment in commercial real estate, which generates continuing income flow from rents.
2022 expects to see an increase in home mortgage rates, further stressing new buyers, but the institutional funds will still be getting poured into real estate and I expect, further compressing the market.

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