No, Wall Street Is Not Buying Up Main Street—Here’s Why It’s All a Myth

[Andrew Syrios]

https://www.biggerpockets.com/blog/wall-street-is-not-buying...

Wall Street is not exactly the easiest group of institutions to defend, in large part because they most certainly do merit an enormous amount of criticism for many of the financial shenanigans they engaged in that helped contribute to the 2008 Financial Crisis, such as being bailed out by taxpayers only to give out exorbitant bonuses to their executives before needing to be bailed out again when COVID struck. And that doesn’t mention the variety of illegal and dubiously legal schemes they’ve engaged in over the years.

But of late, an almost bipartisan chorus has emerged amongst critics of high finance: Wall Street is buying up houses across the country to drive up prices and making homeownership unaffordable for most Americans.

Senator Elizabeth Warren, like many Democrats, accuses Wall Street of “hoovering up a significant chunk of the housing market.”

But many Republicans have also been saying similar things. For example, Texas Governor Greg Abbott is calling on state legislators to limit the number of houses institutional investors can purchase. And across the populist elements on all sides of the political spectrum, you can find people decrying Wall Street’s nefarious attempt to create a “nation of renters.”

Fortunately, in this case, Wall Street is (mostly) innocent of this charge. Unfortunately, due to this false impression, dubious legislation that will hurt small and mid-sized investors (and thereby the cities they invest and renovate houses in) has been introduced. Furthermore, actual solutions to housing’s unaffordability in the United States have been largely ignored as political activists chase after this red herring.

How Many Houses Has Wall Street Actually Bought?

When just looking at a graph showing the percentage of houses institutional buyers have purchased in the last few years, it would seem that Elizabeth Warren and Greg Abbott are, if anything, understating the problem.

Share of corporate buyers in the housing market (2000-2020) – Yahoo! Finance

That is until you look on the left side of the chart and see that what appears to be a skyrocketing amount of houses being bought by institutional investors only changed the percentage they purchased from about 0.5% to 2.5%, not exactly what I would call a “significant chunk.”

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Continued: https://www.biggerpockets.com/blog/wall-street-is-not-buying...