The ultra-rich continue to soar above all regulations and boundaries. They do what they wish with impunity as governments turn a blind eye. You won’t find a more blatant display of inequality than in the housing market these days. There is a glaring double-standard in place: one standard for the ultra-rich and quite another for what remains of the middle class.
Americans have long dreamed of owning their own homes. It was almost guaranteed for the middle class, and for a time, even the poor could aspire toward that benchmark. But these days, after thirty years of gutting that dream, unless you’re an investor or you can pay cash, strict lending standards and low inventories will keep you in a rental indefinitely. Banks’ stricter credit standards following the housing crash, in combination with rising mortgage rates, have put the brakes on lending.
Where I live in the Pacific Northwest, flippers are still flipping and buyers are splitting lots and developers are building what angry residents are calling “monster houses.” These houses are super-sized, like sodas, lattes, and Escalades. They are so huge they block out the sun from smaller houses. They are rampant all over the city. It’s almost as if there’s a scramble to pick up the pieces of destruction wrought from the “Great Recession.” Vulture capitalism at its finest.
US housing will soon be nothing but a flippers game as the ultra-rich merely flip properties from and to each other at an ever faster pace. US home buyers are unable to chase prices into the stratosphere. For example, the median price for a house in San Francisco is now $1 million; for New York City $.5 million. San Francisco caters to the insanely lucrative wealth of Silicon Valley, and “In Manhattan, you have foreign buyers coming in and using properties as a second, third, fourth or fifth home and hedging risks in their home countries,” said Chris Mayer, a real estate professor at Columbia University Business School in New York.
Foreigners are laundering their money with US real estate, and as long as the National Association of Realtors continues to be exempt from anti-money laundering requirements, this explicit money laundering will continue unabated.
In Manhattan, buyers are using cash for trophy apartments and to gain an advantage over borrowers who must depend on loans to finance a purchase. Pej Barlavi, owner of brokerage Barlavi Realty LLC in Manhattan, said three of his five current clients buying homes prevailed with all-cash offers.
Barlavi said two of them are hedge fund managers who used year-end bonuses to buy the properties: a $2.2 million two-bedroom apartment in Midtown, selling for $150,000 above the asking price; and $1.5 million for a one-bedroom in Tribeca. His client in the second transaction was “nudged higher by a foreign buyer” before being chosen by the seller, Barlavi said.