Homes, the largest expenditures for American families, are among those undergoing the most rapid inflation, with the median price for existing homes, now $350,000, up more than 15% from a year earlier, and that of new homes, $375,000, up more than 20%.
Wall Street banks and fund-management firms are a strong force, possibly the strongest force, driving this inflation. This is dramatized by the recently announced purchase by Blackstone, Inc. (not BlackRock, Inc., but of the latter’s genealogy) of a block of 17,000 single family homes to rent, for $6 billion, by buying Home Partners of America. That means Blackstone is paying more than $350,000 per home, top “retail” dollar despite what is obviously a very large “wholesale” purchase. As described in a Wall Street Journal article several weeks ago, there are many such purchases going on by fund management companies – in some cases entire new subdivisions are built just to sell to a financial company to rent out – and these companies are doing so with loans from large banks such as Morgan Stanley and State Street. The rents, as is well known, are securitized and the securities bet on with derivatives.
Thus Wall Street simultaneously drives up home prices, and rents nationwide. The overall effect is that the total market “value” of the approximately 11 million single-family rental homes in the United States, has risen from $1 trillion in 2010, to $2.3 trillion now, an average inflation of 7% per year for the entire interval after allowing for the increase in the number of such homes by one million. The rents themselves have gone along for the ride, rising at an average of 6% per year.
