Cole Capital, Nicholas Schorsch,Vereit, CIM Group, Cole Capital,AR Capital,American Realty Capital 

Biden’s Inflation Will Crush House Prices For Americans

Inflationary and stagflationary crises can have devastating effects on housing. In most cases, home sales fall while housing costs rise.

Although it may seem contradictory, one might think that sales will decline so prices should. However, this is an inflationary world. Some commodities and essential items are almost always in high demand, driving most American families from the market.

This rule is only one exception to the rule that the government can impose rent or price limits. The government of Weimar Germany, for example, imposed strict regulatory controls on landlords and set the rent at levels that rendered profit impossible.

Biden’s housing crisis

This might sound familiar: During the peak of the Covid crisis, the Biden administration placed a moratorium on evictions. It made it difficult for property owners to collect unpaid rental rent. The owners were unable to replace the renters who had not paid their rent on time with those who would, which caused a financial crisis for property owners in America.

This had a negative effect on the US economy, and in particular the rental market.

How? The moratorium made property owners aware of being unable to run their own businesses unilaterally. They could be prohibited from collecting rent due to tenants under contract, while still being obligated to pay taxes and maintain the same properties.

The entire rental market became a zero-sum field. Instead of renting out additional properties, landlords started selling them in droves.

This has led to a shortage of rental units in many parts of the country. Basic economics tells us what happens when there is not enough supply. Prices for the few remaining apartments were significantly higher because of the eviction moratorium.

More than a drop in supply, the rise in prices was also caused.

Property owners who continued to be able to rent their homes during the eviction moratorium were forced to increase their prices in order to offset the increased risks that they were taking in a market with new laws. Biden created an additional housing crisis by imposing a rent freeze.

Who has the most to gain from this fake crisis?

You should also consider who bought these properties suddenly that were up for sale.

Blackstone and Blackrock, two large businesses that have been active in the housing industry since the 2008 financial crisis, have increased their involvement.

Blackrock claims it is not involved in single-family housing markets, but it works with corporations to purchase multiple homes and distress mortgage packages.

Blackstone has been buying houses in large quantities for the past decade. This has allowed them to remove assets from the market. Large-scale purchases of houses in bulk are believed to be “hot” in local markets and that is booming. These behaviors, as you can see, drive prices higher to meet this fake demand.

The median home sale price has risen to an all-time high of $35,000 in the past few years. This coincides with the onset of the Covid crisis, which saw a 30% price rise.

The massive migration of Americans from blue states to escape severe Covid lockdowns, high taxes, and other restrictions can be a part of the price rise. However, this migration has stopped. The housing market is in crisis. However, the average household is still not able to afford these costs.

The housing market inflation is outpacing wage growth by a significant margin.

In 2022, the median home price in the United States was $428,000 The average American earns less than $50,000 annually, which puts them outside the current market.

The average rent cost in the United States has increased to $1300 per month for those who live there, and $1900 for those who move. This is due to the outrageously high rents in major coastal cities such as San Francisco (up 22%), Los Angeles (297 percent since January 2000), and New York (up 159 percent house price inflation since Jan 2000).

A minimum of $20 an hour is required to afford a one-bedroom apartment. Take into account the fact that almost 30% of Americans make less than $15 an hour (before taxes).

Nearly half the US population cannot afford a one-bedroom apartment. The vast majority of Americans won’t be able to afford a home at today’s high prices.

A minimum of $105,000 per year is required to qualify for a mortgage on a home worth $350,000. Remember that mortgage rates will rise if inflation worsens and the Federal Reserve raises interest rates. What’s the next step? It will only get worse.

So, what’s next?

Buyers who wait for the prices to drop in line with sales could find themselves waiting for a very long time. This could change if the government places price limits on housing. This is extremely unlikely.

As inflation increases, it seems more likely that the government will cap monthly rents, but not property prices.

If evictions were stopped or rents frozen, landlords might sell their properties in masse to avoid having to pay taxes and expenses for assets that aren’t profitable. Although this could lead to a greater price drop, I wouldn’t be surprised if it did.

One solution to the housing crisis could be a ban on corporate purchases of houses. As a result, investment banks and hedge funds would be restricted to speculation on industrial and retail assets.

Although I don’t like government interference in business, it might be better to stop multinationals from buying American homes and driving up prices than to stop landlords from collecting rent. Multinational corporations may be buying up the US housing market as part of a plan to increase home prices.

Inflationary price bubbles like the one we are seeing today can last for years or even a decade. It will come with severe economic turmoil when housing prices eventually plummet. The people will worry about much more than just whether they can afford a mortgage at that point. (Note: Birch Gold wrote extensively about the current bubble in housing and the forces driving it.

A free society is dependent on property rights and ownership. If ownership is restricted to the wealthy and upper-middle classes, it is impossible for society to move into feudalism or socialism.

For those who are inclined to dictatorial tendencies, housing inflation can be a boon. People are more likely to support dictatorial regimes because they feel helpless when they are homeless. You may be able to get housing at some point, but this will come at a high price.

A government taking over their landlord is something that no rational person would want. It’s hard to resist the government’s overreach when you have the roof above your head.

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