BIG CORPORATIONS ARE CRUSHNG THE AMERICAN DREAM

Big corporations are crushing the American dream. In America a person can work hard, with determination and taking advantage of opportunities available  can improve his station in life for himself and his family. 

When I was young my dream was rather simple.  Get an education, get a good job, marry the right girl, start a family, and buy a house. What more could you want? For me and many others this was the American Dream and a big part of that American dream is owning a home. But today that path to the American Dream is in jeopardy.  

The average middle class American dies with less than $10,000 in the bank and usually with considerable debt. His major asset is his home. This asset can be used to settle his estate and leave something for his heirs. But recently the ability to purchase real estate is made more difficult by corporate competition. 

Investment firms have long purchased commercial properties and multifamily housing units. Recently, these corporations have invaded the single family dwelling market. Who are these buyers? One such buyer is Invitation Homes, owned by the  BlackStone Group, the largest real estate owner in the country. In 2012 Invitation Homes went on a $10 billion buying spree and was buying $50 million worth of houses a week. In some cases the corporations buy completed housing developments from the builders. Such as happened in Conroe, Texas, where the builder, D.R. Horton, sold an entire development of new houses for $42 million. Not only are corporations doing this but some billionaires such as Warren Buffet and B. Wayne Hughes, owner of the largest self storage company in the U.S., are buying single family dwellings. 

These big corporations and billionaires aren’t interested in all single family dwellings.  They prefer specific houses in certain locations. These houses are near good schools in good neighborhoods and built preferably since 1970. They would be in cities in the so-called sun belt which include Phoenix, Dallas, and Atlanta. No cities on either coast. These corporations have vast networks and tremendous amounts of data determining what is available for them to buy. Why are they doing this? Actually it's quite simple.  PROFIT!  Real estate investment is one of the safest investments with growth potential. And it tends to appreciate, increase in value, rather quickly. Unlike the individual, they buy when they “want” rather than when they ”need”.  Also the large corporations can borrow money at lower rates than individuals. Due to this they can pay a higher price  for a house and still be profitable because they are using less expensive money for purchasing. Also, frequently the big corporations will pay cash for the houses while the individual has to negotiate a mortgage. 

Once purchased, the rental houses are usually managed by property management firms. Sometimes rather ruthlessly. Rents are raised at phenomenal rates. Sometimes up to 95% in a matter of months. Maintenance is frequently poor and many tenants are  eventually forced to move because of high rents or other problems with landlords. Unfortunately, there is little legislation to protect renters.

In the last ten years salaries of the middle class have remained stagnant while rents and housing costs haves skyrocketed. This is another reason why houses purchased by individuals is at an all time low. And the COVID-19 pandemic has simply made things worse. As mentioned earlier, the average middle class American rarely saves or invests. But there is one thing he does every month with regularity if he has the opportunity. He pays his monthly mortgage payment. In doing so he builds a net worth, cash equity. When at his death can be passed on to his heirs or pay off debts. 

As large corporations buy up more of the single family housing units, fewer are available to middle class Americans.

The American Dream will soon be an unachievable dream.