Affordable housing advocates have no bigger villain right now more menacing than Wall Street. One theory believes that Wall Street wants to own all the homes and make us a nation of renters. Another theory pushed by mainstream politicians on both sides of the aisle is that Wall Street’s increased involvement in single-family housing in the last two years is why home prices have skyrocketed. Conspiracy theories are not in short supply (like housing) but is there any truth to the theories? A new analysis from CoreLogic says no.
The Facts. The share of single-family homes purchased by investors went from 16% in 2020 to 24% in 2021. During this time there was also a big increase in mega-investors, aka Wall Street, who own more than 1,000 properties. They went from averaging under 10% of investor activity to almost 20% in July 2021 before falling back closer to 10% at the start of this year.
No Causation. CoreLogic can’t say for certain that mega-investors have had no impact on prices these last two years, but the data doubts that they did.
- Mega-investors have been most active where price increases are the highest such as in Arizona, Nevada, Florida, and North Carolina. CoreLogic even found that the correlation between the share of purchases made by mega-investors and price appreciation is 0.65, a much tighter connection than all other investor classes and prices, where the correlation hovers at 0.39.
- Thomas Malone, an economist at CoreLogic, notes that correlation does not equal causation. States like California, Washington, Montana, and Hawaii also had price appreciation above 20%, but these states have few to no mega-investors.
BOTTOM LINE: Wall Street’s role in pushing up prices was not dissimilar to other participants in the housing sector these last two years. However, Wall Street made up less than 3.0% of purchases nationwide it seems even less likely they played an outsized role.