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Housing Lies Outrunning the Facts 

Posted: May 13, 2024

There is an old adage, variously misattributed to some of history’s more clever minds, which observes: “A lie can travel halfway around the world while the truth is putting on its shoes.” Given the ease with which information – truthful or not – can circle the globe, this phenomenon can have very real consequences in the conduct and formulation of public policy. 

A recent example of this can be seen in the growing perception that “Wall Street” is gobbling up homes across the country and pricing out working Americans. A recent Wall Street Journal headline, “Wall Street Has Spent Billions Buying Homes. A Crackdown Is Looming,” is emblematic of this sentiment. “Billions” is doing a lot of work in the headline, suggesting an outsized role of large investors in housing. But understanding that the value of the housing market is on the order of $50 trillion, and “billions” loses a bit of meaning.  

The underlying story does a better job characterizing the role “Wall Street” plays in housing markets, which is scant little, as the data bear out. Specifically, large institutional investors have virtually abandoned the housing market in the last two quarters. And even prior to that, large investors (ie, those owning more than 1,000 homes) never purchased more than 2 percent of homes in a given quarter, according to one research firm: 

But alas, the lie had already circled the globe more than once before the truth could catch up. Viral claims on social media have asserted that “in 2023 private equity firms purchased 44 percent of all the single-family homes in America.” This claim has no basis in fact. 

The genesis of this misleading stat can be traced to a November 2022 Business Insider story noting that in Q3 of 2022, investors bought 44 percent of flipped homes according to data from a housing market research firm. Note that this observation relates to house-flipping, not overall purchases. It also reflects activity in one quarter of 2022. More importantly, it does not claim that large investors such as private equity or other institutional investors purchased these homes, but rather “investors” overall. Yet this vaguely-worded statistic about a small slice of the housing market has since been distorted into the broad claim that private equity bought nearly half of all homes sold in 2023. The viral claims don’t even get the year right!

Unfortunately, this is precisely the sort of populist grist that some audiences love to mill, wittingly or otherwise. The Washington Times credulously reported this statistic, and had to print a correction. Progressives in Congress and their allies have been more than happy to leverage the perception, if not the fact, that large investors are moving housing markets, and have indulged in further distortion of the facts to suit their narrative. Indeed, the facts have to be distorted, otherwise they wouldn’t fit. Quite plainly, “Wall Street” isn’t a major player in housing markets. A recent estimate from the Urban Institute finds that institutional ownership of single-family rental homes stood at 3.8 percent in 2022 nationwide.

To be sure, market participants have been keen to invest in areas that have seen significant growth over the pandemic, particularly in the Sunbelt. But again, small- and medium-sized investors are the driving force behind this investment. For example, Texas was a leading market for home investors in 2023, with investor purchases comprising 31 percent of home sales in the state. However, large investors (i.e. “Wall Street”) were only responsible for 4.2 percent of single-family home purchases the year prior. This share of large institutional purchases is consistent with other public data. For context, in 2023 Texas saw 330,684 home sales.   Assuming the same share of large investors as prevailed in 2022, this suggests that roughly 12,000 single family homes in Texas were purchased by large investors in 2023. This comprises roughly 0.1 percent of the roughly 12 million housing units in Texas.

The upshot is that “Wall Street” hasn’t purchased anywhere near 44 percent of homes. At any given time, large investors don’t even own a tenth of that, and the rate of purchases is on the decline. Nevertheless, the lie has made it around the world and back again, this time landing in the Texas State House, where both the Governor and Lt. Gov. have appeared sympathetic to the false notion of “Wall Street’s” role in housing. Indeed, the Texas Senate has been charged to investigate the role of large investors in the Texas housing market. Let’s hope the truth catches up soon.