I’ve mentioned occasionally that I was once in the antiques business. Never as a full-time job—it was always a hobby but it was a hobby to which I devoted substantial energy. I derived maybe a quarter of my income from it. How good was I? I once asked a question of a highly knowledgeable full-time antiques dealer who scratched his head and said “If anyone other than you had asked me that question, I’d’ve sent them to you.”
Consequently, markets in which end users compete with reseller for inventory interest me. The largest of such markets is housing. At MarketWatch Keith Jurow muses over what is propping up housing prices:
In a recent column, I focused on five key factors which indicate that housing markets may be topping out. Yet one other important factor may be the main reason why housing prices have not already deflated.
Investors have always played an important role in housing markets. I have written extensively about the crazy bubble years of 2004-06. Rampant speculation was one of the primary causes of the buying mania and subsequent collapse. A May 2005 Fortune magazine article described how speculators were descending on city after city in search of making a killing in real estate.
In other words there are three distinct groups in the housing market: individual homebuyers, small investors (those owning between one and ten properties), and large, institutional investors. It is the second group that is keeping housing prices from falling through the floor.
As I have also mentioned before we have lived in those for around 30 years and over that period our real estate taxes have increased ten-fold while our house’s market value has increased three-fold. And I live in one of the best markets in the city. I don’t see how that trend can persist but, apparently, Gov. Pritzker and Mayor Lightfoot do.
It would be interesting to see a breakdown of housing ownership by metro area. The closest I’ve come is here which shows a significant difference between the patterns of owner occupancy and absentee landlords in Chicago by comparison with Los Angeles or New York. I would speculate that institutional investors are practically absent in Chicago.