Is Corporate Greed Causing Inflation?

A little late to the thread and haven't read it all.  Have we discussed the hedge fund companies investing in single family homes as an financial vehicle?

In my area, homes have more than doubled in price in the last 3 years and anything even remotely "starter/entry" priced is bought up by companies for cash deals (effectively pricing out anyone wanting to actually buy their first home).  They then rent the homes back to the population for ever increasing amounts and families never have a chance to accumulate wealth through homeownership.

A couple weeks ago I saw an interview with a particularly punchable smarm-bag who was bragging about how his company had bought 30,000 homes in the last 5 years.   That feels problematic, I'm hoping house prices tank and take all those vultures into ruin.

The worst history teacher I've ever had (due to her personality, not her knowledge) used to point out wealth disparity and use it to foreshadow events (like the French Revolution, or the Great Depression).  I've always wondered what she would have to say about right now:

(Pre-Depression Versus Now for comparison)

Cite: https://www.digitalhistory.uh.edu/disp_textbook.cfm?smtID=2&psid=3432

Honestly, looking at the figures above this was probably more a case of target fixation on the old teacher's part (I mean, we've exceeded the income disparity of the pre-depression era) but it does have me watching things with interest.

KyAllroad said:

A little late to the thread and haven't read it all.  Have we discussed the hedge fund companies investing in single family homes as an financial vehicle?

In my area, homes have more than doubled in price in the last 3 years and anything even remotely "starter/entry" priced is bought up by companies for cash deals (effectively pricing out anyone wanting to actually buy their first home).  They then rent the homes back to the population for ever increasing amounts and families never have a chance to accumulate wealth through homeownership.

A couple weeks ago I saw an interview with a particularly punchable smarm-bag who was bragging about how his company had bought 30,000 homes in the last 5 years.   That feels problematic, I'm hoping house prices tank and take all those vultures into ruin.

 

I did a post that kind of touched on that earlier, but frankly i thought this thread would be locked by now so i haven't checked to see if anyone else has expanded on that topic 

Toyman! said:

So, back to the original topic. 

Are companies giving out raises based on the inflation numbers? 

Should they? 

Or should they try to get prices back down to pre-inflationary numbers by keeping their costs down? 

 

 

I can't speak for everyone, but I don't believe many companies are giving out raises based on the inflation numbers. 
 

Should they?  Inflation is not a company's responsibility. Running their business is. Part of running their business is hiring and retaining staff. If they are not offering wages that meet the needs of potential staff members, then they will suffer the consequences (and not be able to run their business well). 
 

"Corporate greed" is a fallacy. The vast majority of business owners are struggling to try to figure out how to handle the problem of inflation and running their business. 
 

It's not their job to fix inflation. 
 

The swing between a 3% profit and bankruptcy ain't much.  How many companies are operating in that 3-5% margin? Most of them? 

SV reX said:

"Corporate greed" is a fallacy. The vast majority of business owners are struggling to try to figure out how to handle the problem of inflation and running their business. 

That doesn't make it a fallacy, just a rarity on a per-company basis. Millions of struggling convenience stores can't erase fossil fuel companies profiteering off the Ukraine invasion, Ticketmaster's monopolism, Broadcom moving the decimal point on VMWare licensing costs, etc.

06HHR (Forum Supporter) said:

KyAllroad said:

A little late to the thread and haven't read it all.  Have we discussed the hedge fund companies investing in single family homes as an financial vehicle?

In my area, homes have more than doubled in price in the last 3 years and anything even remotely "starter/entry" priced is bought up by companies for cash deals (effectively pricing out anyone wanting to actually buy their first home).  They then rent the homes back to the population for ever increasing amounts and families never have a chance to accumulate wealth through homeownership.

A couple weeks ago I saw an interview with a particularly punchable smarm-bag who was bragging about how his company had bought 30,000 homes in the last 5 years.   That feels problematic, I'm hoping house prices tank and take all those vultures into ruin.

 

I did a post that kind of touched on that earlier, but frankly i thought this thread would be locked by now so i haven't checked to see if anyone else has expanded on that topic 

I've heard this a few times and decided to do a little research.

A little reading shows that institutional investors (Investors with over 100 homes) only own about 4% of the available single-family homes. I don't think they are swaying the market as much as you think. 

Total single-family rental units are about 17% of the total market. Most of those are owned by individuals running an LLC that rents out one or two houses as a side job. Unfortunately, those small LLCs are lumped in as investor-owned rentals when it comes to writing news articles about corporate investors buying 40% of homes. It makes for good reporting because it's sensational but it's not really good reporting. It's reporting that sways opinion by not telling the entire truth. Link

I don't think those 17% are going to sway the entire market a significant amount. They just don't have that kind of control. It's still a supply-and-demand market. 

Pete. (l33t FS) said:

This is why the rich owners don't LIKE a strong economy.  They are more powerful and can increase their bottom line if the economy is weak and unemployment is up.

Ummmmmm... that only works in a very narrow range of circumstances before the weak economy itself hurts the bottom line due to loss of revenue.

I wouldn't say it's a fallacy, necessarily. Corporations are run by human beings, and most human beings are wired to try and get as much stuff as they can, be that money, possessions, whatever. Further, the people who run corporations are duty-bound to maximize profits for their shareholders, owners, or whomever controls the purse strings. So yeah, corporations are greedy. But that greed is generally held in check by competition. Competition for the marketplace, for workers, for access to raw materials, and so on.

Before someone comes in with "that's the theory", I know that, and I know market distortions happen, especially when said corporations are in bed with lawmakers, as most of them are.

Look, I'm a capitalist. I think that our system has done more to raise the standards of living for everyone on the planet than any other system, ever. But that doesn't mean it should be completely unfettered. If you look at the "robber baron" era of the late 19th century, with monopolies and trusts, workers with no rights or representation, and a few people like Carnegie and Rockefeller essentially running the country, that was unsustainable, too. If the government hadn't reined things in with things like the Sherman Act and the Clayton Act, things could have gotten more violent and unstable than they already did in that era.

As usual, nothing is completely black-and-white.

In reply to GameboyRMH :

There are processes to correct actual corporate greed. 

https://www.axios.com/2024/05/23/ticketmaster-live-nation-doj-lawsuit

Those processes will work better if we do away with Corporatism. 

There has been a running joke that our elected officials should have to wear sponsor signage much like NASCAR. I, for one am all for it. 

I have noticed two things: 

1) The last tax cut for corporations did only one thing, instead of investing in their workforce or equipment, all they did was buy back their own stock, artificially inflated their stock price, which did nothing to increase production one iota.

2) I judge inflation by the cost of a 4x8 sheet of 7/16" OSB at Menards. 15 or 20 years ago it was $6 dollars a sheet. In 2019 it was $50 a sheet and today it is $16 a sheet.

In reply to Toyman! :

I'm not so sure about that.  It seems most of the 17% of the homes getting bought are in the "starter-home" price range.   Because those homes are generally smaller and easier to rent out.   If that 4% of institutional investor owned homes are concentrated in a specific part of the market, it can definitely sway the market.  

This is my hypothesis of course and unfortunately work is making me actually work so I don't have time to go digging for data.

In reply to Ian F (Forum Supporter) :

There could be some truth to that. I don't know if they break it out by starter vs other homes. 

There aren't a lot of starter grade homes being built around here though there are a few. It looks like most of them sell on the regular market as fast as they are finished but I can't find any hard numbers. 

Edit:

This article states that investors bought 26% of the cheap housing in 2024 Q4. It also notes that it's not institutional investors, it's the individual investors. It also notes that if interest rates drop those percentages will increase.

https://www.businessinsider.com/housing-market-investor-purchases-affordable-homes-fourth-quarter-redfin-2024-2

In reply to Toyman! :

I'm part of that 17%. I have an LLC with 2 rental houses. My total annual profits aren't much. I've told both of my renters that if they want to buy them, I'll work out a deal for them. Both happily rent. Why? My rent is much less than the cost to buy them because I have them priced based of my cost structure and not the current costs.

One of the houses just had a house sell down the street for $255K and it's close enough to what my house is to be a direct comp. For them to buy it today, it would be $2225 a month all in with escrow and mortgage at 10% down. My rent is $1850. 

This is not uncommon. In my area, 250ish is the price of a nicer single family starter home. 

Anybody who desired to start a poop storm could assert that a more likely cause of inflation is excessive public-sector spending.  But I would never do such a thing.

barefootcyborg5000 said:

 But in four months I'll have my own garage AND a spare room for my hobbies. 

All I'm reading here is the resurrection of the Funderbird 

In reply to maschinenbau :

Optimism! We will see. It is still intact, and has been pulled onto the slab up at the compound. Not sure what will happen to it. One of the ...difficulties... with building a car specifically for the Challenge, it's good for little else. 

Duke said:

Snowdoggie (Forum Supporter) said:

Doing well by working hard and getting better at what you do is a good thing.

Doing well by bribing government officials in order to fix the game in your favor is something else entirely.

It is also most definitely NOT capitalism, despite what so many people seem to believe.

 

What we have in Washington and Wall Street right now are villains straight out of an Ayn Rand novel. Having political pull will make you more money than building a better widget. There is also a whole lot of difference between a small to medium sized manufacturing or construction company and a large, politically connected company that buys, sells and strips the values out of other companies. The first kind of company has to design and build a product and actually make it work to make the customer happy. With the second kind of company it is more about who you know and how much you can borrow and what politicians you can pay off to look the other way. If you really want to scare yourself about the state of our current union, do research on how many congresscritters are actually invested in or even run or start Private Equity firms or are involved in other forms or creative finance. It doesn't matter what party. Both sides are heavily involved. And these are the guys who are making the rules. Yes. I know that finance is an important part of building any company, but this is getting to be extreme.

barefootcyborg5000 said:

36yo, single earner household of four here, no college degree, no certificate. Also happen to live in an expensive area. Average home costs in the area are $475k and rising. I also have poor impulse control and not great spending habits. We've had regular trips to Disney for the last few years. We live better than any of the previous generations in either family.
 

They're digging out for our footings next week. We didn't buy the bare minimum. We didn't buy a fixer. We didn't buy in a bad part of town. We didn't buy out in the boonies 20 miles out of town. We bought new, close to things, with more space than we need. 
 

Im a parts guy. I did it. Things are difficult. Things have always been difficult. But in four months I'll have my own garage AND a spare room for my hobbies. My kids will have their own rooms, and my wife will have a new house. There's a lot of discouragement out there. Don't let it in. 

I missed this from yesterday. Dude, that is awesome! We are similar in education and profession. We decided to not have kids, which has allowed us to save and prepare for an early retirement. As long as the economy doesn't completely melt down and those in charge steal our 401/403/roths/TRF(not that it will, but dumber things have happened in history) we will be done with working by 58. Life's far from easy but with enough drive, planning for the worst and a little luck you can come out smelling like roses. 

Here's what I mean by fallacy...

Toyman started this thread. He's a small businessman who most of us would probably agree is respectable and runs his business with a high standard most of us would applaud. "Corporate greed" doesn't apply to him. 
 

So the question at hand is are corporations as a whole run by people like Toyman, or greedy bastards?

Are there greedy people running corporations?  Absolutely. But is corporate greed the cause of inflation (or any number of other problems)?  No, it's not.

"Corporate greed" is too often used as a catch-all phrase to transfer blame to the faceless and unnamed "greedy bastards" and promote a victim mentality. To that extent, it's a fallacy. It's an excuse for bad choices and personal failures that we don't want to take ownership of.  It works for driving angst filled post counts on an app or website, and it works for getting angry people to get to the polls, but it doesn't work as an explanation for the problems of the world. It's a fallacy. 
 

Do bad things happen to good people that are beyond their control?  Yes. Sometimes E36 M3 happens. But the world is not a bad place because of "corporate greed".  Corporations are run by people most of whom are just trying to do their best in a world that is often stacked against them. Like Toyman.

1988RedT2 said:

Anybody who desired to start a poop storm could assert that a more likely cause of inflation is excessive public-sector spending.  But I would never do such a thing.

Dude, I said that in one of the first posts in this thread! 

This is great.  We have 7 pages of intelligent discussion with no name calling or threats.  This just shows what a complex issue the economy is.

I just wish the decision makers were affected by their actions as much as the average citizen.  A little compromise would sure be nice.

In reply to SV reX :

I'd have to disagree that corporate greed had no role in inflation or any other problems. I think we can agree that some fraction of corporations (mostly the bigger ones) are run by greedy bastards. It's pretty clear that their greed had at least had some role in the recent inflation - there are companies that had elevated profit margins for much of the pandemic, most notably fossil fuel companies since the Ukraine invasion, and fossil fuels are a common input all across the economy.

I could also get into the fact that the top 5-9% of workers has taken nearly all productivity gains since the '70s. I would categorize that as a corporate greed problem. So yes, I think corporate greed is a major factor in the world being a bad place. Corporations are run by people and a lot of them are greedy bastards who would knowingly destroy the habitability of the only remotely habitable planet we've ever seen to get more money in their own pockets. That's not a hypothetical example either, that was just ExxonMobil.

In reply to GameboyRMH :

Yep. We disagree. 

In reply to GameboyRMH :

When are you starting that company?