00;00;00;02 - 00;00;16;11
Unknown
Wall Street's being blocked from buying single family homes. Institutional investors are being banned from housing. And really, that's just not the truth.
00;00;16;13 - 00;00;45;08
Unknown
What's up everybody? Welcome back to the seven Figure Flipping podcast. I'm your host Adam Whitney. And today I'm going to tackle a topic that I've seen all over the internet. And it's kind of ridiculous. And people are straight up just lying to you for clicks. Here's the thing. The administration routinely says things to get that population to get all fired up about something or view things like they're making some big change and in our case, in the real estate space.
00;00;45;11 - 00;01;10;11
Unknown
President Trump said he was going to stop institutional buyers from buying up houses in the residential space. He was going to make it harder for them, so they couldn't do it. But the truth is, institutional buyers only make up like 3% of all home purchases annually. And by the way, there are like 4 million transactions a year happening, so it's not really that many transactions happening.
00;01;10;11 - 00;01;42;18
Unknown
So the impact on the United States housing market is already minimal. That doesn't mean locally there couldn't be an impact. And I'll give you a quantifiable example. So in the state of Florida, coming out of Covid 19, the housing prices were booming. Here we're talking things were doubling in value at that time. Institutions poured into Florida. They purchased up entire neighborhoods, and they changed the entire price point.
00;01;42;18 - 00;02;09;23
Unknown
So on a very micro level, they certainly impacted that market. But nationwide, it's really a minimal impact, a completely minimal impact on the real estate housing market. Now, here are the headlines that we've seen and the drama they're creating around this. Wall Street's being blocked from buying single family homes. Institutional investors are being banned from housing. And really, that's just not the truth.
00;02;09;23 - 00;02;37;27
Unknown
Because what happened is there was an executive order and by the way, an executive order is not a law passed by Congress. And what it did was it directed federal agencies to limit federal support. So like loan guarantees and insurance securitizations for these large institutional purchases of single family homes? Now, it also ask agencies to define what qualifies is a large institutional investor.
00;02;38;03 - 00;03;04;09
Unknown
So that's not even that's not even out there. They haven't even been who who this actually applies to. And it's also encouraging the prioritization of owner occupants and certain federally influenced transactions. What does that even mean? Who really knows? It doesn't really. The clarification here and what you need to know is it does not immediately ban institutional investors from the market.
00;03;04;09 - 00;03;23;28
Unknown
They're not banned at all. It's just an executive order telling the federal government to put some things in place. And I used to work for the federal government. I was a marine for 20 years in the intelligence community. And when you tell the federal government to do something, they do things called. They plan over what's called the fired up and FDP, which is a five year financial plan.
00;03;24;00 - 00;03;47;29
Unknown
So something we might put in place today becomes realize five years from now we don't really move as fast as you would think. So this isn't something that's going to change tomorrow. Now, they could do some things, but the reality is it's going to have a minimal impact. Okay. And here's the thing. The policy exists now because of the public frustration with housing affordability.
00;03;48;01 - 00;04;10;13
Unknown
There's a perception that the large investors are crowding out families and there's political pressure to do something about it. And really, the biggest drivers of affordability continue to remain the limited housing supply, zoning and construction constraints. So if you think about the Pacific Northwest or some of the coastal areas where it's, you know, people want to be in the Sunshine States, I want to be on the coast.
00;04;10;16 - 00;04;28;14
Unknown
So they have high density. They don't have a lot of room to build up or to build out. So there, the zoning will allow people to put ADUs and other dwelling units on existing land. And when they start to loosen up, that which, like San Diego has and some of these other places have, that is what helps with housing affordability.
00;04;28;16 - 00;04;53;28
Unknown
And then, of course, the biggest driver, the thing that is crush people from being able to buy is the cost of borrowing money. A 30 year fixed rate mortgage, we got super spoiled, got down the 2% range. Some people have 2% mortgages. And in reality, the average mortgage over, you know, 90 years has been 7%. And today we're in the fives.
00;04;54;00 - 00;05;20;04
Unknown
It's actually not bad. But coming out of that 2% range, it allowed the housing prices to go way up. So for I feels like it hurts a lot more. The other thing that we don't consider is that the problem isn't necessarily just the cost of the housing, it's also the wage growth or lack thereof. So the amount of money that people get paid did not increase, but the cost of the house did.
00;05;20;04 - 00;05;38;24
Unknown
So there became a gap between what people are making and what the cost for housing is. So the if that gap were to cause people to make more money, and that would arose with inflation and what happened coming out of Covid, the cost of housing would have been negligible. It would have just been a bigger amount. But since people are making more money, it doesn't really matter.
00;05;38;27 - 00;06;02;11
Unknown
And here's the thing. We've got to think about what people are missing here. Institutional ownership is smaller than it feels. Nationally, large institutions only own relatively small percentage of the single family homes, and a lot of times are selling. They'll get a thousand houses and then they'll just sell it to another institution. They're just trading the houses back and forth.
00;06;02;12 - 00;06;29;01
Unknown
So it's not like it's always new acquisitions. And then you got to think about federal support versus private capital. And many institutional buyers do not rely heavily on federal loan programs. That's limiting the federal support. So so when they say we want to limit the federal support, limiting the federal support may change how they buy, but not whether they buy because they've raised capital from regular people like you and me, citizens who are putting their money into retirement funds.
00;06;29;04 - 00;06;50;00
Unknown
And they're leveraging billions of dollars from that to go buy whatever they want. They have massive buying power because of the amount of capital they have access to. And honestly, there's really no impact on existing inventory. The policy doesn't require institutions to sell homes. They already have to create more inventory. So it really means the current supply dynamics remain largely unchanged.
00;06;50;02 - 00;07;18;17
Unknown
And the implications for mom and pop investors. Really, there's a little bit of upside, like slightly less competition and specific price points or markets, maybe maybe some improved buyer and seller sentiment towards individual investors because they've made these institutional investors out to be the bad guy. But the reality is price relief is unlikely without new supply, and institutional capital may simply move to different structures or markets.
00;07;18;17 - 00;07;39;14
Unknown
They're going to find a way to employ that money. They have to because they have to pay their investor returns. And honestly, the competition is not really disappearing. It's just kind of adapting and changing and molding. So, I've done podcasts and other ways that, institutional buyers or billion dollar publicly traded companies are getting creative with what they're doing.
00;07;39;17 - 00;08;03;09
Unknown
They're just finding new ways to employ that capital. Most of this is really about consumer sentiment and not market reality. This is how people feel. The government, the administration goes and pulls on those feeling strings to to be in favor, to get the things that they really care about passed. So if we look at the bigger picture here, the policy really raises a broader question.
00;08;03;11 - 00;08;24;17
Unknown
Is this the beginning of a meaningful housing reform, or is it just a symbolic move addressing sediment more than supply? In my opinion, I think it's just symbolic. I think it's just addressing sediment. I don't think that they have as much control. There's not that many things that they can actually do to increase supply. They'll do it. There are things are levers.
00;08;24;17 - 00;08;51;24
Unknown
They can pull, but it will not turn on a dime. It's more like turning a carrier ship than a speedboat. And kind of here's the bottom line. This is an this action. And my mind is political. It's psychological. It's it's like a signal to the people in the United States, more than it has anything to do with marketing or altering events.
00;08;51;27 - 00;09;18;07
Unknown
So stop listening to people to try to get clicks on the internet by telling you things that are actually mostly irrelevant to you. They don't matter. So go out and focus on what you can focus on. You can focus on what the current circumstances are in your environment. You can find the inefficiency in the marketplace, and you can go employ your skills as a real estate investor to take advantage of that, to do good in your community and make money for your business and your family.
00;09;18;10 - 00;09;44;16
Unknown
And I'm going to stop there. Get off my soapbox on this. Stop listening to the people who aren't doing the thing, okay? They're just out there to grow their social media and get clicks. Thanks for tuning in on this one. I'd love to hear from you if you have an opinion on the housing market on this Trump ban thing and you actually care about it, or if you don't care about it, send me a message on Instagram official Adam Whitney.
00;09;44;16 - 00;09;59;14
Unknown
Like send me literally send me a DM. I will be on there to answer you and say you're right, this is nonsense. Or no, actually I see it a different way. I'd love to hear your opinion. Thanks for tuning in. And as always, if you got something out of this, leave us a five star review and I'll see you on the next one.
