Cash Is No Longer King

As I write this, I‘m caught in the real estate version of Musical Chairs, that gap between selling my primary residence and buying the next one. The selling part was easy, and step one in a routine move back to the land of friends and family, and where real estate has long been inexpensive and abundant.

As recently as a year ago, this would have been a common and thoroughly benign proposition; barely worth a mention. But today, it is a choice that threatens your ability to keep a roof over your head. As a result, there is the looming possibility that owning another primary residence may be a thing of the past for me. And how many others?

If you aren’t currently shopping for real estate, it is impossible to know what kind of emotional turmoil is involved. The short version of my experience is that it has consumed my daily life for seven months now, and is punctuated by disappointment after heartbreak at each failed deal. There have been too many of those to even count, with no end in sight. Meanwhile, I am essentially homeless unless I find rental housing, which is just as competitive. And I am not alone.

It seems that everyone has an opinion about why this is happening at this time — when nearly every economic indicator suggests it should be the opposite — and whether or not there will ever be a return to the home-buying environment of 2019 we are all familiar with. Besides numerous conversations with friends and family, I have resorted on occasion to checking in with some YouTube videos posted by supposed experts on the subject.

Just last night I watched one of these videos posted by an energetic young real estate investor who was bragging about all of the investment properties he owns including the 13 single-family homes he has purchased just in the past year with the intent of turning them into rental properties. I also watched in horror as he encouraged his vast YouTube audience to do the same. A quote from this video was, “If you don’t own investment real estate in the next 6 months, you likely never will.” That was just another way stimulating FOMO among his subscribers, and of saying that this current inability for non-investors to buy a home as a primary residence is — in his opinion — the new reality. We all must think about the implications of that.

In a capitalist environment, this was inevitable. Right now, those who already have real estate assets are the only ones in a position to have more of them. Those with limited assets simply become financial prey by being turned into permanent renters. While this might be merely distasteful for purely discretionary transactions, have we considered the implications of subjecting something as vital to life as the roof over your head to the oppressive environment of financial speculation?

Essentially, for every residence purchased by an investor, there was a buyer (several, probably) who was priced out by that speculation, and who will now be subject to whatever price and rules some investor wishes to impose for the privilege of living in their residence as a renter.

Should one of those priced-out individuals have been able to buy the home instead (like the old days, you know, a year ago), they would enjoy the relative security of choosing the life they want to live in that home, for as long as they wanted (or needed) to live there. That renter’s only crime was that they were not already rich enough to compete with the hordes of well-healed speculators that are egged-on by YouTubers and financed by the federal government.

That YouTuber was right about one thing: this will only get worse for individuals, and better for investors without government intervention. In his own words, “this will not end until 80 to 90% of the single-family homes in the country are owned by investors, not those living in them”. Those investors will have the right to exercise a high degree of control over the lives of other people in their role as landlord.

Landlord rights include imposing arbitrary rent-increases or outright eviction on their tenants, all at the whim of the landlord and for the purpose of higher returns on their investment. How many of those landlords will actually behave in a way that provides the security and freedom from eviction a person enjoys when they own their own home? History teaches us, not many. History also teaches that the more properties an investor (or, worse, a business entity that operates in their name) controls, the less humane their attitude toward any single renter is likely to be.

Does that YouTuber ever stop to consider the human toll of his “savvy” investing, or of inciting others who already have more than they need to further aggravate the scarcity of available homes, and drive up prices even more? The speculators themselves recognize that the gobbling up of residential housing by investors further pushes wealth to the top 1%, but they claim only to not want to get left behind themselves. Convenient.

These “advisors” also urge their fellow real estate investors to only buy in areas where the prevailing laws make it easy to get rid of tenants who — even temporarily — can’t pay their rent. “Get rid of” is the heavily sanitized version of being able to throw a family out on the street with the full protection of the law for the sake of one thing only: profits.

Most analysis of the current housing market compares available inventory against the “demand for housing”. But that “demand” does not distinguish between investors, first-time buyers, second, third, or fourth home buyers, those who would prefer to move whenever it’s convenient, and those who currently do not have a roof over their heads. In other words, discretionary demand (including speculation) and basic need demand (no place to live) are clearly worlds apart. It’s easy to see who really needs the few houses currently available, as opposed to those who would simply prefer to buy a house if the opportunity presents itself. For those with plenty of available credit, that opportunity always exists.

Yet, current stats do not distinguish between any of those very different categories of people, instead choosing to lump them all into the category of “demand” in order to obfuscate the human toll of speculation. Human cost is so very inconvenient in the world of money and profit.

It would be fair to reduce this demand to those who actually have the means of purchasing a home as of 1-year ago. Among them, those who currently do not have a roof over their heads surely deserve a place in line ahead of speculators who typically have multiple roofs.

Instead, the speculators buying houses now are those who are not only already secure in their primary residence, but also have the means to afford one or more additional homes for investment purposes. Humanity dictates that these are the least worthy of them all. But, rather than acknowledge this, we have allowed capitalism to prioritize the housing market for us. We do this not only by not taking action, but also by virtue of many government policies that actually make it easier for the investor-class to add to their collection of houses, at the expense of those who have none.

Capitalism is designed to take advantage of any void of leadership as an opportunity for profit. In this case, the void is created by a failure of government to address the needs of the individual over the purely discretionary interests of profits and speculation. Government is there specifically for the purpose of protecting individuals from the many interests that would rob them of their security for the sake of profit.

To date I have made 18 all-cash, over-asking, and quick-close offers, but was outbid each time. I was told the high bidders were investors looking to add to their “rental portfolio” using money backed by the US government. In other words, it was essentially the US government that was preventing me from buying a house at any price because I wanted to pay cash; cash is limited, the willingness to borrow at zero-percent interest is a much higher number. Cash is no longer king.

Most believe the only victims of this fiasco are first-time home buyers with low down-payments, or those still aspiring to be homeowners “someday”. That simply is not true. Pure investor-class speculation in real estate, using cheap government money, has driven me, and many others in a variety of situations, back to being renters despite having substantial amounts of cash in the bank and a long history of home ownership.

We could solve this problem instantly by instituting a country-wide policy of prohibiting the ownership of land by any entity other than individuals. In short, only those who will actually be occupying the land full-time. One to a customer. Most of the questions this raises have already been answered because we currently do that very thing with the tax codes. Why not just extend that to the actual titling of land, house or no?

We are so far from that possibility at this moment that it is hard to imagine many in government — especially when being continually lobbied by business interests — will find the integrity to recognize the needs of ordinary citizens over for-profit entities, despite the fact that this is the very reason governments exist. Why have we allowed land — the Earth itself — to be owned and controlled by speculators whose profits depend on ignoring the needs of the people who must occupy that land?

Also, never forget that the current real estate market is only one tiny but glaring example of this attitude of government that allows more and more of the basic needs of life to be subjected to the profit motive. Healthcare, anyone? Where will we draw the line? Anywhere? Has it even occurred to anyone in a position of policy-power to prioritize citizens over profit-making speculators? Sadly, I don’t see it.

In America today, you can own a home for 15 years as I did, and still be forced back into being a renter when your only crime is selling your current home before you have a deal for the next one? Plenty of cash in the bank, just no signed contract. Such is the danger of a housing market that is being dominated by those whose only interest is a financial one, not a human one. The more who are willing and able to heed the call of that YouTuber and wield their financial power to deny others the opportunity to enjoy the security of home ownership, the fewer non-investor homeowners there will be. That is actually the goal.

It is widely acknowledged that real estate is one of the last available paths for individuals (read: the 99%) to build a personal nest egg. It was only a matter of time until the investor-class would attempt to hijack this segment of the economy and turn it into a new profit-center. And we haven’t even begun to talk about the obvious connection between real estate speculation and homelessness. We’re even further from that discussion.

When will speculation in the real estate market come between you and your house? Not possible, you say? So did I.