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welcome to the Deerwood Realty YouTube channel I'm John Schink founder and managing broker of Deerwood Realty in St Louis Missouri well maybe you maybe you started here with the the the title of the show today the episode we got to get that Wall Street out of single family home G I hate Wall

Street we'll go through it but I don't think it's as simple as that I don't know that it's Wall Street that's causing the problems Ah that's a that's a take so we'll we'll get through that uh that thought later on uh that's foreshadowing again but let's get to the uh let's get to the original bill so this is this is the end hedge fund control of American home homes act and I just want to go through it with you because I think I think it's kind of fascinating so here we go it says our nation faces an a housing affordability crisis relatively I agree with that but I don't know that it'll always be that way while some of our housing challenges including a supply shortage will take years to remedy again is it a supply issue others can be addressed immediately including a ban on single including a ban on Hedge funds owning and controlling large parts of the housing market American family should not have to compete with multi-billion dollar corporations when purchasing a home I agree with that I agree with that it's past time we give every American Family a fair chance to become a homeowner and put an end to hedge fund taking over the housing market now I there's a couple themes here I'm going to try and not screw it up but it says American Family a fair chance to become a homeowner but I don't know that that's what's I don't know that that's going to happen exactly that way it says largescale hedge fund investors are taking over the single family housing market or I'm going to say single family I'm sorry at an alarming and accelerating rate in 2011 no single entity owned over a thousand single family rental units so now we're in rental units as of June of 2022 the urban Institute estimates that large head funds and other institutional investors owned roughly 574 th000 single family homes data from the first 3 months of 2023 shows this trend continuing with hedge funds purchasing 27% of single family homes now look I don't know these numbers are going to get really really muddy okay and I don't I don't want to muddy them but I'm just going about this look I'm a real estate broker I help people buy homes I help people sell homes I have investors that want to buy homes and rent them out it's not unusual I have people that want to flip homes I I I deal with all of it I've flipped homes before and I've also lost my ass flipping homes so I mean you know I feel like I I understand this this situation it says the end hedge fund control of American Home acts seems to or seeks seems seeks to put an end to this harmful practice of hedge funds buying up single family homes okay all right so they said that there's this there's these hedge funds and those are the bad guys hedge funds defined as people companies that own over a thousand single family homes that's those are the problem okay and so here's what it's going to do it's going to ban hedge funds from owning single family homes and requires them to sell at least 10% of the total number of single family homes they currently own to families per year over a 10-year period now look I I'm not trying to be a jerk but I I I don't care if you sell it to families or a single person what does that have to do with anything like like it's almost like you have to be a family just to be able to buy a house I don't it's just H I'm not into that one and also um why are we doing this over a 10-year period it's 2023 right now so by 2033 they're going to eliminate all their portfolio that's not really fixing the um uh problem immediately that's over a decade to me is a long time it says subject head funds to a $50,000 per single family home per year tax penalty on the number of single family homes owned above either zero or a scheduled 10% reduction per year in over 10 years winding down to zero after a 10year full phase out all hedge funds will be completely banned from owning owning single family homes I don't understand like how you're just G to what are you are you're just going to ban people like ban a hedge fund how does that work exactly I just I just don't understand like how that happens and then you're going to do a a $50,000 per single family uh home per year tax penalty which is fine I I I think the tax code has always been used for punishment it punishes income I mean I I totally get it it definitely it definitely shapes lots of stuff so okay then it says it imposes a 50% tax on the fair market value of any future hedge fund purchase of a single family home so who's going to determine fair market value I mean that's going to be the fun thing and then it says tax penalties this is so wonderful tax penalties paid by hedge funds are reserved for down payment assistance for people seeking to purchase homes sold by hedge funds now we're going down to people and not families and they're going to like I mean you talk about just you start off with a with some sort of concept right Wall Street owns too many Homes single family homes and now you've gotten to well we're going to force them to pay us money so that we can have uh down payment assistance for people seeking to purchase homes it's like our FHA is like 96% so you need 4% down and we need even more

assistance why don't you just make it why don't you just make FHA 0% down you got on

USDA it says then ensures the tax penalty focuses on problematic actors by excluding nonprofit organizations I would argue that in the world nonprofit organizations and non-governmental organizations are some of the worst offenders and causing more problems in your life than anyone else right now anyway uh public housing agencies and other government entities so the government itself is obviously is not profiting off of this right they're never never they're not just picking who they're going to use no okay says it includes an explicit certification process for a purchaser of a hedge fund owned home to confirm that they do not own a majority interest in any other single family residential real estate so they're going to say they're going to find out a way to keep you from doing it I suspect it's going to be like a waiver when you sign it at the end like when you purchase a house it's going to say you're not part of a hedge fun you say no and then 10 years later they come back and go oh you really were here we it says the purchasing of single family homes by hedge funds especially in the current housing market so again this thing supposed to take a decade to work itself out but we we're worried about the problem right now serves only to make profits for the investors and provides no value to the communities where these homes are located and I'll just I'll just ask this simple question who's paying the property taxes on these homes that are owned is it not the hedge funds and if the hedge funds are paying the tax taxes then aren't they providing value to the communities where these homes are located and I'm not for the hedge funds I'm just saying they are providing value because they're paying the taxes and if these homes were not occupied by anyone else they're the only ones paying taxes now I'm just I don't want to hurt anybody's feelings okay I don't want anybody get mad at me but I'm just saying it's it's more than that it's it's it's much more than that people should not have to go up against hedge funds when they are trying to buy a home in their Community well I agree with that okay but it's not that it's not the hedge funds over a thousand units that are the problem I don't think Banning hedge funds from the single family housing market will help enable more families the opportunity to purchase a home and combat the growing large investor landlord mile now who would argue with that right I'm okay with I'm okay with the thought again it's the practice that's the problem okay so let's get and I have to do one thing right on my whole broadcast tonight and that is this okay so now we're going to go to this article here it says no Wall Street investors haven't bought 44% of home this year okay well all right so how many did they buy what what are we doing here okay and it says our big Wall Street investors really buying 44% of the homes this year the answer is no not even close housing inventory is near alltime lows but big institutional investors like invest in Invitation Homes or Black Rock aren't to blame the 44% claim was made in the headline for a medium article last week and then spread like wildfire over social media Congress has even jumped in on the badwagon with Democratic lawmakers introducing bills looking to limit or ban hedge funds from buying single family homes so this is a reflection of what what what what was said the 44% claim now I doubt that the bill was written at the as a response to the 40 4% claim and I don't like Invitation Homes or Black Rock so I mean I don't mind Throwing Shade at them again though I I don't think that they're the only problem it says 2023 has seen its share of crazy housing miss the Airbnb crash I'm still I'm still in belief that at some point in time there will be a significant number of investors holding on a property right now that are going to get sucked with higher property taxes and higher Insurance costs making renting their units for the current prices or higher impossible and making you wonder should is there enough profit to even make it worthwhile this is me this is my opinion I don't think it's crazy whatever but it might be the dumbest so far because the claim is so easy to disprove look at the data it will tell us everything we need to know now this is written by a fellow who's very full of himself like he's he's really full of himself and I don't know that even if something does happen in the housing market negative he'll ever he'll just be like oh I was wrong I I don't know if he'll even say I was wrong he he's not that type it'll be very fascinating to see how it goes uh in the in the future I'll say I I don't know I have no idea I have no idea I'm surprised that the rallies lasted this long it says the first chart below provided by Freddy Mack shows where large institutional buyers rank is a percentage of the marketplace as you can see even if you add them together with the eye buyers there are a tiny percentage of the total home home buyers in America in fact institutional home buyers those who bought 100 plus homes in a 12-month period didn't even reach 2.5% market share at the peak level in this data line which goes back to the start of the century well let's look at the chart here you got your individual in Institutional Investor and then you got your iar so you're at uh these are corporate buyers the share of the purchase market so how much is the share so it's it's not that high right it's only like

2.5% and if I could be wrong but this is every single year okay they're buying this many so I mean over time that's quite a bit right says the overall market share for of investors has grown since 2000 and is currently around 30% as seen in the chart below but the vast majority are small mom and pop investors and there we go there we go it's it's how you play with the numbers and and I want to credit uh Logan on this it's not if you want to get mad at somebody it isn't the Thousand this isn't the Thousand units and up it's the middlings it's the people that own between like 10 and 50 properties there's a lot of those people out there and they are they are problematic but you you can't you can't go after them because there's so many in my opinion so what do we do now do we have a mom and popop investor ban on single family homes it says at the end it says so to make a long convoluted story very simple there's nothing in the data to show that Wall Street has been the big buyer homes in the United States since 2000 if you want to pin the blame on someone you're have to to condemn those avocado toast eating kids the Millennials who started buying homes in 2013 and were the largest percentage of home buyers until mortgage rates Rose in 2022 since then gen xers and Baby Boomers have once again come out on top either way it's not Wall Street but that isn't a sexy talking point in the class Warfare dialogue he's right he's right I I I'm my headline to this episode is Wall Street something because more people will watch Wall Street than Mom and popop investor it's like a it just it just gets to you right so that's what he said so now let's look at a different one it says this is from core logic their Rel I mean their their data is is solid it says this was from August though so it's it's a ways back it says us home investor share high in early summer 2023 the sizable us home investor share scene over the past two years has held steady going into the summer in March of 2023 investors accounted for 27% of all single family home purchases by June that number was almost changed at 26% but that's every month 27% of all the sales a quarter of all sales are bought by single family are bought by investors that's a significant number it's just not the Wall Street number of a th000 units and above it says this is the share of homes purchased by investors by month figure one shows the share of Home purchases made by investors since January of 2019 the year 2021 saw a surgeon investor activity investors have since held a market share that averages 8 percentage points higher than 2020 investor activity has declined slightly since early 2023 but there's still no sign that the share will fall back to its pre-pandemic level in the near future indeed most likely reason for the small drop in home investor purchases in recent months this seasonality is owner occupied buyers become more active in the summer which is true they do but what they're saying is is it's not going below this number ever again I don't I just don't believe that but here we go the share of homes sold to investors versus non-investors through Q2 of 2023 it says figure 2 illustrates the number of us home purchases made by both investors and non-investors through March of 2023 in April May and June of 2023 home investors made 85,000 98,000 and8 2,000 purchases respectively over the course of the second quarter this was an annual decline of 990,000 purchases however when compared with the same months in 2019 the increase in home investor activity Rose by more than 43,000 when comparing that number with non-investors who made 392,000 fewer purchases in Q2 2023 than Q2 in 20 2019 it becomes clear how different the current market how different the current market than it was in the previous few years so you can see just I I mean people are going to argue that it's like oh no that's just a small percentage but it's a significant number of units says home investor share size share by size since 2019 as the total number investor purchases decline smaller investors are growing their market share which is what you would expect like that's that's where the problem is figure three shows that shows it throughout 2023 Mega investors those that own a thousand or more properties and large investors those that own between 100 to 999 properties have both held market shares between 8 and N 8 and 10% each month in the case of Mega investors this is a dramat drastic decline from the high of 17% of all investor purchases recorded in June 2022 let me just stop and say the I buyer boondoggle I mean that those are institutional buyers but there's no question but it was such a mess and I think most people have gotten out of it but what do I know it says as medium investors those that own 10 99 properties saw a modest decrease in activity from 37 to 35% typical housing market investors are becoming more and more likely to operate smaller scale owning three to nine properties in June this group accounted for 47% of investor purchases the higher since 2011 so here's what's going on it isn't Wall Street buying up these houses and this has been my argument the whole time it's people buying multiple Properties or owning multiple properties because they can float them because of what had traditionally or historically low interest rates I mean if they're bought on investor loans they might have to refinance those things at some point in time that's also going to be a problem so it's not Wall Street per se Wall Street has a part in this but they don't have the massive part that you would think it it's small investors median investors Mega investors and large investors these are the people that are causing the problems in affordability and you'd hate to be you hate like you want that to not be the case right you want to believe that your neighbor who owns three houses in some part of town that you wouldn't live in you want to believe that that guy's a decent fellow right right you don't want to believe he's a like a miniature slum Lord right you don't want to believe that and and gosh if I catch Flack for that I apologize okay because not everybody's a slum Lord right not everyone and that's and that's just it I mean if you're a responsible owner of property great but I I I just think that between I mean this this it's not so easy to throw Wall Street under the bus here as much as I'd like to it's the mom and popop investors and there's there's thousands there's thousands of them throughout the United States and they've done it this way for so long they wouldn't know how to do it El other otherwise I mean this is this is I mean that was always the funny part of like some some national company's going to come in and say St Louis okay and they're going to redefine the investor market like people have been flipping houses in St Louis for decades you think this investor company is just going to come in and figure things out why do you think Zillow why do you think Redfin why do you think these companies just lost their asses it's because they didn't know the they didn't know the market they they didn't they had no chance okay now in this case all it's doing is inflating home prices but again it's the it's it's not just the mega investors that's my point so this here is a little headline uh this is Kevin o this guy got paid a bunch of money for crypto he was he was and I hope crypto doesn't down downvote me in YouTube but anyway he said that uh earlier this month uh arrived well the article said uh a Jeff Bezos backed real estate company announced a new fund aimed at acquiring single family homes us rep R cono responded to this news on in a post on X thing the last thing Americans need is a Bezos backed Investment Company further consolidating single family homes and putting home ownership Out Of Reach for more and more people housing should be a right not a speculative Comm housing should be a right it's not a right right now it says earlier this month uh oh sorry it says it's a then uh the Kevin o chimed in on on on Fox Business says very bad idea very bad policy when you try to manipulate markets or sources of capital as if the FED doesn't manipulate the housing market and all Finance markets I don't care if they're Democrats or Republicans whoever they are stay out of the markets let the markets be the markets well that's brilliant you know buy crypto is what he said and he got paid like 47 million for it or something crazy anyway it says oir argues That Wall Street provides a needed funding source for the housing market and offers the lowest cost of capital I mean just out of the blue random quote that doesn't help any anything it says finally it says ared co-founder Alexander chosa said on X I agree home ownership is Out Of Reach for most which is why we created arrived to helped anyone own property for as little as $100 investors on arrived aren't billionaires they're just just folks who want the same security and wealth homeowners enjoy well why is that why do why do folks have the same security and wealth why do they because they own it and you don't and why would you I mean the idea this is so bad such a bad idea okay so then you got this it says this is on Fast Company I thought this was interesting it says um a new bill aimed at kicking Wall Street investors out of the us how housing market but will approve affordability it it just rehashes most of the things we've talked about it says the bill has yet to gain the support of the White House nor has it gner support from Democratic Leadership in the senate or republican leadership in the house and I would submit to you that this bill has no shot of ever passing right it's it's so I mean the it's nice to talk about these things you know it's like what I like to call puppy dogs and rainbows right we're going to have this wonderful event and it's it's we're going to have this wonderful bill and it's going to solve all your problems s think about Obamacare that solved everyone's problems right nobody has problems with health insurance anymore um think about all these infrastructure bills remember if we get shovels in the ground it's going to build our infrastructure all these infrastructure bills are going to be great it's going to really help the economy every single Bill even when it's passed does we have no idea what's going to happen by the way does Congress even do bills anymore do they even do they even get legisl or do they just do they just do the you know fund these wars like do just is that all we do now I just when's the last time you've heard of a bill being passed it's amazing it says a close examination of the democratic bill co-sponsored in the Senate by Tina Smith reveals a broad definition of hedge funds encompassing Real Estate Investment Trust and corporations this suggests the bill would not only Force out giant single family rental operators but also Hal many future build to rent projects is the buyer often a large Institutional Investor well we can't have that right that'd be terrible and then they've got a guy here Erdman he's uh he wrote shot out how a housing shortage caused a Great Recession and crippled our economy and building from the ground up reclaiming the American housing [Music] boom it says us been been under building for decades and faces significant lack of adequate housing Supply I disagree I've explained my reasons he says as a result of the regulatory tightening after 2008 we need millions of new homes and this new bill would force Builders to sell them peace mail a few at a time rents are already undermining the country's economic fairness and capacity I shuddered to think of the potential ramifications of this travesty if this passes I cannot imagine or cannot fathom a functional source of new housing that could stop the bleeding in American rent

inflation that's that's totally random too so the quotes we've got is from Kevin o crypto crypto guy Shar tank guy and and this guy who wrote a book that says we need more [Music] houses finally we have this little spot here this was this was uh this was uh from the the the the congressman or the senator that it's a I'm sorry he's a representative although representative Smith Senator Marky so who are we talking about we're talking about representative Smith in 1971 my father was able to buy the house I grew up in for $155,000 on the salary he earned as a baggage handler at CAC airport that same cost house would cost nearly $500,000 today yet wages for workers like my father have not kept up too many families in the Puget Sound region and across the country are struggling to afford to rent or buy a home now all of a sudden we're worried about rentals again like being a able to afford rents rents not buying says this crisis has been exacerbated in recent years by increasing number of large investors purchasing a significant P percentage of single family homes squeezing out prospective buyers well does the data show that I mean they are buying houses Congress must take action to crack down on corporate agreed and get hedge funds out of the single family home Market we talked nothing about the Mom and Pops the people that own between three and nine properties between 100 and 999 those those are the people that own most of these uh these properties but anyway it says I thought this was interesting following the 2008 housing crisis large private Equity firms and hedge funds bought substantial portfolios of foreclosed homes as an investment opportunity by the way you know I remember that time and I I talked to some people that had some money and we wanted to buy houses you know just buy the foreclosures fix them up and turn them around for for people to buy no big deal couldn't do it CU Fanny and Freddy had these limits on investor purchases so we couldn't buy but if we were a hedge fund okay then we could buy the whole the whole thing I thought that was a travesty I thought that was a massive wealth transfer and I thought it was terrible but whatever it says um however in 2011 no single entity owned over a thousand single family rental units as of June of 2022 the award insute estimates that large head funds and other institutional investors own roughly 574 th000 single family units further to meet the return further to meet return expectations of investors hedge funds and other investors maximize profits by imposing high rent increases inflating fees and delaying Home Maintenance and improvements and we're to believe that only institutional investors do that not the local mom and pop they never inflate rates rents they never inflate fees and they never delay Home Maintenance it says the housing in our neighborhoods would should be homes for people not for profit centers for Wall Street yet in every corner of the country giant Financial corporations are buying up housing and driving up both rents and home prices it's time for Congress to put in place Common Sense guard reels that ensure all families have a fair chance to buy or rent a decent home in their community at a price they can afford the rental part scares me why are we worried about the rental like I don't understand I don't know I have a few questions let me just look at them and says this is this is one it say should housing be treated primarily as a commodity or basic human need I think it's definitely a basic human need and I think that people have turned it into a commodity and they've turned it into a commodity because it's what I would call subsidized financing the 30-year mortgage is fantastic okay it's it's it's a tool that you can use to really uh massively leverage yourself um you know in life you know if you don't have to if you don't have to pay a huge house payment you can buy other things it helps the economy in theory but it is also a basic human need and I do think that as we see you know when financing gets expensive like it had been for the last couple months at 8% you can see how it just slows things down and so you know maybe that wasn't such a bad thing maybe that slows people down from buying all these houses and maybe returning some Supply so that that you know regular people can buy homes it says is government intervention in free markets Justified to ensure housing affordability this is a trap this a trap question there is no such thing as a free market in the United States it is massively man ated by government policy and by the way I'm okay with that except for the idea behind that was that the government was going to enforce rules they were going to be the referees on the playing field of the of the giant Marketplace and what turned out to be like they're being bribed the refer are being bribed in the game it's like it's like the WWE it's like that ref is just totally in the bag for corporations and that's when it went sideways and it says can market-driven Solutions alone address the housing affordability crisis yes yes and it will it will rates go up to 8% rates go up to 10% 20% whatever it slows down everything it will definitely and then by the way I mean I still think there's a significant problem in the United States with with debt and with affordability and inflation that isn't going to be tamed and I think that you're going to see this manifest itself somewhere we've already seen how used cars are starting to go down in price we'll see what happens it's it's you know it's like what is going on today and then what's going on five years from now and it's I mean it's impossible to predict with any certainty so I would just say um what do you think that's I would I would pose a question given what I've shown you do you really think it's the Wall Street investors on in this particular time that are the ones that are problem and are you able to to say you know and and and be conscious of the fact that maybe it's these people that own between 100 and 999 units that are the problem or the people that own between three and 10 units that are problem I don't want to put a cap on anybody owning a home okay their own home but I think if you're going to treat a home as an investment okay and this is just this is just me if you want to treat a home as an investment there needs to be some sort of policy in place that says this is an investment okay you do not get a better deal in the form of taxx breaks than someone who's a single family homeowner just an individual that alone would fix if you just went with that philosophy that would fix the single family housing market in the United States immediately because the the benefits for owning real estate outnumber I mean I cannot think of an asset class that you should rather own than than real estate you may say I'm biased because I'm real estate I got into real estate because of the tax benefits in real estate I found those to be fascinating anyway I've run long enough I can't believe I've run this long if any of you have made it to the end of this video thank you it's been a long time coming uh this was this was something I've been thinking about for the last week and just haven't been able to put it on video so with that I'm going to head on out thank you for watching thank you for listening and I'll catch you on the next one