The Root of Evil

Hey,

2020 was a bittersweet year for me. While many of my coworkers were deemed expendable, I gained more responsibility at my job. While travel was grinding to a halt across the nation, I got engaged to my fiancée in Nashville. And while many were seeking government exemptions to avoid eviction, I was able to purchase my first home. Unfortunately due to the current housing bubble, its unknown when many people will get to experience that euphoric feeling.

There’s been a perfect storm of events that have led to this current housing situation. Pension funds are frequently investing in large hedge funds in order to cover the losses sustained during the 2008 housing bubble collapse. Earlier this year, retail investors piled onto “meme stocks” such as GameStop in order to “short squeeze” hedge funds that were betting on certain brick and mortar stores to fail during the Covid-19 pandemic. As a result, hedge funds experienced huge losses, and those losses caused huge pension fund losses as well.

The pandemic led to a large percentage of people working from home across the country, and a large desire to move further away from metro areas since they no longer needed to go into the office. The pandemic also caused a huge decrease in new homes being built as soaring lumber prices drove construction to a halt. And finally, with everyone looking to sell homes and move, and a decrease in new homes becoming available, there became more homebuyers than there are home sellers. Essentially, supply and demand went into overdrive.

Whenever there’s a shortage of any good or service, there are winners and losers. People are now competing against more people than ever before in terms of being able to win housing bidding wars. Sensing a market that could be exploited, hedge funds, using pension funds, are now entering the housing market bubble and purchasing available homes en masse. Sometimes, they even bid way over asking price to ensure that normal homebuyers with limited income are unable to compete. This results in a scenario where available homes are being bought out by Wall Street and rather than building home equity, potential buyers are being forced to rent longer than intended. Record low interest rates aren’t helping either, but I digress.

The logic behind hedge funds buying homes is simple. Essentially, pension funds are recurring payments that go out to retirees. In order to handle those demands, it’s advantageous to find recurring revenue streams that can offset this. Renting out homes is one such way to accomplish this. The tradeoff is that normal homebuyers who are looking to build equity and possibly generational wealth are unable to compete with literal billionaires who are driving housing prices to the moon. And frankly, I’m surprised we still have faith in the wealthy to prioritize altruism over the almighty dollar.

We live in a society where billionaire corporations ruthlessly chase efficiency at the expense of humanity. Companies are cutting maternity leave and demanding robotic perfection from humans that they discard when they can no longer keep up. Live music venues have been crushed by the pandemic and are being replaced with corporate venues even further in bed with the major labels. Small and medium sized businesses are shuttering for good while being replaced by companies that require their delivery drivers to poop in bags to maintain the unrealistic standards being placed on them. And while all of this takes place, union busting and lobbying prevents any worthwhile improvements from being made. We’ve sold our literal and figurative collective souls and we have nothing to show for it but richer rich people.

And that is the root of all evil.

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