Buying a house right now isn't easy with interest rates at a 20-year high amid soaring property values. While Congress has little say over things like interest rates or property values, some lawmakers are considering taking action that restricts some of the buyer's competition.
You may think the only people interested in buying a single-family house are families. However, that hasn't been the case in recent years. Many hedge funds, and companies with big budgets, have been buying up homes as well. Oftentimes, the hedge fund can pay all cash to the sellers and quickly turn the property into a rental, leaving families out of luck.
According to the Urban Institute,as of June 2022, large hedge funds owned around 574,000 single-family homes nationwide. Twenty-seven percent of single-family homes sold during the first three months of 2023 were purchased by large financial groups.
On Capitol Hill, these statistics have attracted the attention of Democratic Sen. Jeff Merkley of Oregon and Democratic Rep. Adam Smith of Washington. A proposed bill would require some companies to sell off their real estate holdings in the coming years and completely ban such purchases in a decade.
With no Republicans backing the bill, right now it's doubtful that in 2024 the legislation will pass. With the current political divide, it's more likely the bill will not even be voted on. Many conservatives believe that Washington should stay out of saying who can and cannot buy homes.
But this legislation is sparking debate about homeownership, who owns rental properties, and even whether local or state governments could enact restrictions. While some homeowners' associations in the U.S. have taken steps to limit rentals, depending on how many properties an investment group owns, they could control the outcome of any community vote.
The biggest impact of all of this may be Black and Latino families. According to the Federal Reserve, fewer than 50% of Black and Latino households in the U.S. own a home, well below the national average of 66%.
FAQs
Yet, in every corner of the country, giant financial corporations are buying up housing and driving up both rents and home prices,” said sponsor Sen. Jeff Merkley, a Democrat from Oregon, when introducing the bill in December.
How many US houses are owned by hedge funds? ›
Institutional investors — such as hedge funds, private equity firms, and endowments — owned an estimated 574,000 properties as of June 2022, according to the Urban Institute.
What bill bans hedge funds from buying houses? ›
Skinner Bill Would Bar Hedge Funds from Snatching Up Single-Family Homes. Last week California State Senator Nancy Skinner introduced SB 1212, which prohibit an investment entity from purchasing, acquiring, or leasing a single-family home or duplex.
Why are hedge funds in decline? ›
In a low interest rate environment, the fixed fees became less attractive,” Sonnenfeldt told CNBC via email, adding that hedge funds could no longer “deliver exciting returns.” Hedge funds are actively managed funds with a focus on non-traditional assets and employ risky strategies.
Why are corporations buying single-family homes? ›
Institutional investors are able to outbid working families for single-family homes by tapping into their wealth, buying these properties in cash. Further, they have been buying smaller, more modest homes — properties that would usually be purchased by first-time homebuyers.
Why is BlackRock buying houses? ›
The truth is that Blackrock has not bought one house. They do not buy houses but there is a similar fund that does buy houses by the name of Blackstone. These are not the same funds nor are they controlled by the same people.
Why are hedge fund owners so rich? ›
Hedge funds seem to rake in billions of dollars a year for their professional investment acumen and portfolio management across a range of strategies. Hedge funds make money as part of a fee structure paid by fund investors based on assets under management (AUM).
Why is Wall Street buying up houses? ›
The trend accelerated during the COVID-19 pandemic when low interest rates and rising real estate prices spurred investors to expand their portfolios. By 2022, investors accounted for nearly 30 percent of sales of single-family homes, up from an average of 16 percent just three years earlier.
Are investors buying all the houses? ›
Less than 2% of single-family homes are owned by investors with 10 properties or more, statewide, according to the California Research Bureau. What institutional investor-friendly markets have in common: Rapidly growing populations and relatively low real estate prices compared to rents.
What's a hedge fund and why are they bad? ›
“Hedge funds are riskier investments because they are often placing bets on investments seeking outsized, shorter-term gains,” she says. “This can even be with borrowed dollars. But those bets can lose.” Hedge funds take on these riskier strategies to produce returns regardless of market conditions.
A hedge fund is a limited partnership of private investors whose money is pooled and managed by professional fund managers. These managers use a wide range of strategies, including leverage (borrowed money) and the trading of non-traditional assets, to earn above-average investment returns.
Is BlackRock a hedge fund? ›
BlackRock manages US$38bn across a broad range of hedge fund strategies. With over 20 years of proven experience, the depth and breadth of our platform has evolved into a comprehensive toolkit of 30+ strategies.
What happens if hedge funds collapse? ›
Regulatory bodies are under obligation to investigate the fund and the manager in question. Depending on the extent of the losses, investors may lose all their money, or recover a portion of their investment. On top of investment losses, investors may be obliged to pay tax on realized losses.
Do hedge funds hurt the economy? ›
The influence of hedge funds on the global economy is undeniable. Their investment decisions can affect asset valuations, stock prices, and market stability. Furthermore, their ability to invest in a wide range of assets and markets can translate into a unique perspective on the world's economic health.
Will hedge funds exist in 10 years? ›
Overall, the consensus is that hedge funds will continue to grow but will adapt to lower fees, greater use of technology, and increased access to retail investors.
What are hedge funds currently buying? ›
Largest Hedge Fund Buys
| Stock | Company Name | Total Value Bought |
|---|
| WMT | Walmart Inc | $ 3.53B |
| GE | General Electric Co | $ 3.51B |
| QCOM | Qualcomm Inc | $ 3.49B |
| ASML | Asml Holding N V | $ 3.46B |
82 more rowsPolicymakers in states across the country are finally pushing back on Wall Street firms buying up swathes of single-family homes to rent out at high prices. But they're facing the might of a powerful new single-family rental lobby.
Is buying a house a good hedge against inflation? ›
During inflationary periods, real estate prices historically keep up when adjusted for inflation, which may be why real estate is considered an inflation hedge. Rents also tend to rise along with prices when there is high inflation, making investing in rental properties attractive to investors.
What percentage of homes are owned by investors? ›
According to national data provider CoreLogic, the sizable U.S. home investor share of ownership seen over the past two years held steady going into the summer of 2023. In March 2023, investors accounted for 27% of all single-family home purchases; by June, that number was almost unchanged at 26%.
