[sphinx65]

This is happening almost everywhere, but at a less frightening pace than CA. And we are told continually by the chattering class and politicians that skyrocketing real estate prices - asset inflation - is a good thing. Since forever a stable residential real estate market was the goal and people understood its value. Now we're all gamblers, meaning losers. When the hedge funds and REIT's stop speculating in residential real estate and pull out, there will be a deafening crash.

[HillaryBriss]

Maybe the biggest reason they tell us that skyrocketing real estate prices are such a good thing is simply that, as long they keep skyrocketing, we won't see huge quantities of failed home mortgages.

[cylinder]

Hedge funds and REITs are not involved in single family residential in the Bay Area, and even as a whole they are small players. Most REIT assets by far are in commercial / multifamily property.

[sphinx65]

They're huge players in single family rentals. Blackstone (a hedge fund) is the largest owner of single family rentals in the USA. And they really don't care about cash flow that much, they are trying to inflate the price of the asset, hence all the "cash over asking" sales. Which means they will dump it when they can't keep causing the prices to rise.

[guftagu]

Why would they stop and pull out?

[Retric]

Bubbles act as de facto Ponzi schemes.

As money movies in prices inflate and returns are good. This attracts more money. However, it's the flow of money which is generating above market returns which requires exponential increases to keep returns up. Exponential growth is never sustainable so eventually new money can't keep up which lowers the returns. This further reduces the influx of money, further depressing returns. This pops the bubble.

Of note, the 401k system did similar things to the stock market which ended up reducing returns. In the end exponential returns are only viable when the outflow of money is greater than the inflow enabling a steady state. Eventually returns will end up averaging out as if that influx never happened, but it's going to take decades.

EX: A farm get's a fixed amount of sunlight, it can increase efficiency up to a point, but in the end it's going to output a fixed amount of food <= some constant * amounts of land. Investing more money can't push past that limit (diminishing returns), so eventually you just have more money chasing a lower return. On the other hand if you don't invest more money then the dividend continues indefinitely.

A huge range of things have increased in value because other parts of the economy improve. But, this is limited by overall economic growth. Also of note long term market manipulations are counter productive. You can prop up housing prices by reducing future returns.

[throwanem]

Why did they in 2008?

[sphinx65]

The hedge fund buying spree happened after 2008.