Jun 24, 2013
House prices are on the rise in California again. In Los Angeles, home prices in April were 18 per cent higher than a year before. The price increase was even higher – 25 per cent – in San Francisco and Sacramento.
The explanation we get is the usual one: supply and demand. There is a shortage of houses on the market, we are told; that’s why prices are so high.
Except that the house shortage is artificial. There are plenty of vacant houses, but big investment banks have bought them. Blackstone Group, for example, has bought 26,000 homes in nine states; Colony Capital, an L.A. based investment firm, owns 10,000 properties and keeps buying more. These “investors” are sitting on most of these houses, creating an artificial shortage to push up prices.
Others are “flipping” houses – buying a house in order to sell it quickly to another “investor” – each making a profit as the shortage drives prices up. About 6,000 homes were flipped in California in the first four months of this year – more than one in 20 homes sold in the state. And realtors use this artificial shortage of houses for sale as an excuse to jack up the prices – so that they make more profit too.
So there all these empty houses, and a lot of families who want to buy a house – but can’t afford one.
It’s another bubble, created by speculators – just like the one they created a decade ago that burst in 2007.
We’re living in an economy that bounces between speculation and financial crashes: 21st century capitalism.