An Easy Way to Play the Real Estate Boom
Andy Snyder|June 24, 2021
Wall Street just bought 17,000 houses.
Oh my.
The news comes at a time when the average buyer – with mortgage note in hand – has been forced to the sideline. Unless he’s got cash… and a lot of it… the market doesn’t want him.
The media is having a field day with the news that Wall Street is adding to the pressure.
But here’s the funny thing about that… Wall Street is actually relieving the pressure.
This is another case where the story outweighs the facts.
A Better Market
On Tuesday, The Blackstone Group (BX) announced it will acquire Home Partners of America (a company it helped start) for $6 billion. The deal brings a small city’s worth of single-family homes into Blackstone’s portfolio.
Despite the media’s cries, the move will not add to the real estate bubble.
In fact, it will do just the opposite.
Virtually nowhere in our modern economy have bigger companies led to higher prices.
In other words, when mom and pop shop owners decry Walmart and Amazon for slashing prices and stealing business, they can’t then open the other side of their mouth and say these big home buyers are pushing the prices of houses higher.
It’s not happening.
Things don’t work that way.
If anything, the love affair between Wall Street and Main Street should be celebrated. It’s adding efficiency and liquidity to a market that has historically had huge transfer costs and lousy price discovery.
Blackstone’s deal is a good example of why that’s true.
Home Partners has a unique business model. It’s a rent-to-own firm. Again… good news for buyers.
It allows folks who have borderline credit scores or who can’t come up with a down payment to rent a home with the intent of purchasing it within a matter of months or a few years.
This gives buyers a no-risk shot at homeownership. Worst case, they rent for a few years and never qualify for a mortgage. Best case, the company molds a new homeowner.
It’s a win all around.
But what about the notion that big, mean private equity firms like Blackstone are buying up all the houses and pushing bids higher and higher?
That, too, is a fantasy.
The same folks who say big companies always rip off the little guy are now saying those companies are outbidding the same rube.
“You Think We’re Stupid”
Companies like Home Partners and its equally large competitor Invitation Homes (INVH) have very sophisticated pricing models. They do not pay a penny more than they should. And because investors like them are buying 1 in 5 homes – at most – in any given area, their price modeling spills over into the rest of the market.
In other words, these companies are actually helping to prevent dangerous bubbles from forming.
But, alas, that doesn’t make for great headlines.
Instead, the media makes us afraid of the real estate boogeyman. It tells us some big, rich guy is buying up all the houses, leaving the average Joe out on the street.
It fails to mention those homes need somebody to live in them.
And without the right prices, those homes will sit empty. That’s a very big motivator.
So here’s our take on the situation…
Buy, Buy, Buy
Don’t be afraid of the boom in real estate. Take advantage of it.
Some of the biggest names in money certainly are.
And here’s the very best part of our capitalist system… You can join them. You can own the same shares they do.
Shares of Blackstone are up 33% in the last 90 days.
And shares of Invitation Homes are up 20%…
All while the S&P 500 is up just 7%.
It’s proof that for just a few bucks, you, too, can get in on the action.
You’ll own a stake in a company that is making the real estate market safer, more affordable and more transparent than ever before.
Just don’t tell the media about it.
We’ll keep this opportunity our little secret.
