High liquidity, artificially low interest rates and the lack of access by many in certain areas has pushed large banks (through shell companies) foreign investors (France's pension fund for example) and speculators to purchase single family homes as replacements for bonds as income generation investments for their investors.
Blackrock, Fidelity and many other investment organizations have access to liquidity and have investors who used to get yield in the bond market.... those things have come together in the form of investment vehicles designed to be relatively stable yet pay 5%+ yield based on the leasing of single family homes to those who can't buy. A couple ETF's are in regulatory approval currently that will open this to the "retail" investor soon.
Here in AZ a large part of the market is shadow sales of single family homes into these types of collective real estate vehicles. That M1 liquidity connects directly to the growth in the single family home value/cost in many areas of the country. Blackrock doesn't care if they pay 20% over asking as they have investors waiting for the yield on the other side as they will make it back on advisory fees. They have access to the money from the big banks who in turn have access to a never ending stream of cash from the Fed.
The Fed has created this with artificially low interest rates, they have also fueled it with QE/stimulus to the banking system. Asset inflation is everywhere. 20 stocks account for 80% of the S&P's gain over the last 5 years while most of the others are near flat to negative. Housing is the current asset bubble. Multi-family housing and Industrial real estate are also huge markets for these types of investment vehicles.
With $30T in national debt the interest rates aren't rising anytime soon if ever again. At current levels the debt will consume 60% of the federal budget in terms of GDP in 2028 and 90% by 2035. No way they will raise the rates on that kind of repayment structure. So... Boomers and X'ers who are going to retire are looking for alternate vehicles to convert their stock equity into during retirement years. Real Estate of all kinds is a relatively safe place to put a portion of that money that will yield 2 to 3x that of bonds for the foreseeable future.
What's interesting is that most people with a pension own part of these inside those pensions. Bonds used to account for a majority of pension holdings but at 2.2% yield they won't make it much longer with retirements moving higher so they need to find yield around that 5% area (that's how they were set up) with lower risk than the stock market. Foreign countries invest their pensions heavily in our markets and these real estate investment vehicles are also in their holdings.
This is why home prices are not tracking the individual's ability to buy one. A plan to help the economy has created bubbles.... Imagine that!
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