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Chapter 1: What is the main topic discussed in this episode?
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It is hard to buy a house. It has been hard to buy a house for a while now. And the other day I heard a story of someone who I think might have gone further than anyone else in that quest. James Lawrence.
James is your classic New Hampshire guy. He likes the cold, likes the mountains, and he likes his girlfriend's cats.
Lorelai and Rory. Love it. Lorelai. Yes, they are named after the Gilmore Girls. Amazing.
In 2019, James was in a bit of a tough spot, housing-wise.
Yeah, James is in the National Guard. Yes, sir. You definitely do not have to call me sir, by the way. It's just how we talk. And the reason he was in a tough spot was because recently he'd gone off to do this National Guard officer training all the way in Missouri. And while he was away, he'd given up his apartment to save money.
Which makes sense. But when he came back...
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Chapter 2: What recent actions has President Trump taken regarding housing affordability?
This is ridiculous.
It was right then and there that James had a realization that many, many people have had before him. He was going to get a place of his own. He was going to get a mortgage. He was going to spend his money not on rent, but on his future.
So I was like, oh, yeah, this is great. I'm just going to buy a condo. It's going to be great. You know, I have a little bit of money. I have the VA loan option.
But then, like many bright-eyed and bushy-tailed prospective homeowners, he met the reality of the real estate market.
Oh, there's listings. Oh, that's something I can't afford. Or that's an hour away. Or that, you know, it needs work.
The main sticking point, though, was the down payment. He just didn't have enough to compete.
And then it got worse. COVID hit, the housing market went wild, rich Bostonians were coming to New Hampshire paying all cash.
Yeah, now there was no way James could compete. Unless, unless he somehow figured out how to get his hands on a wicked big down payment.
So he came up with a kind of extreme plan. Get rich. Because the money's really good, and if he went someplace a little bit dangerous, it could also include hazard pay. Cherry on top, all that he earned would be tax-free.
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Chapter 3: What extreme measures did James take to afford a home?
I'm so sorry. But you've driven up housing prices by purchasing hundreds of thousands of single family homes.
So we wanted to find out, will this policy help people like James when he gets back from Djibouti this summer?
To figure that out, we needed to understand how many houses institutional investors are actually buying, what they're doing with them, and how that's affecting prices. So we called up Caitlin Gorbach, who co-wrote one of the first economics research papers looking at this. How are you doing?
I'm doing well. It's been a crazy week to see my research suddenly so timely and relevant, but I don't regret it.
Yes. Timely and relevant. In fact, the day we talked to her, Caitlin was getting ready to fly to Washington, D.C. to talk about her paper in front of Treasury Department economists.
But that was on the schedule before any of these policies came out.
Do you think the room is going to be more full given recent news?
I don't know. You'll have to follow up with me on that next week.
Caitlin started looking into this subject when she got her first professor job at UT Austin. It was 2022, on the heels of the pandemic and one of the sharpest rises in housing costs ever.
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Chapter 4: How did COVID-19 impact the housing market for first-time buyers?
So the next question Caitlin wanted to figure out was, in the places where these big institutional investors were buying up the most real estate, were rent prices and housing prices lower or higher than in similar neighborhoods?
And she said the answer was yes. Basically, it depends on when you were talking about, what time frame. For example, there was a period when the industry was first kicking off that rents fell in neighborhoods with a lot of houses owned by big investors in comparison to similar neighborhoods.
This was in the aftermath of the housing crisis. It was investors' first big foray into becoming big landlords. And what they were doing was buying up foreclosed properties that had been owner occupied and converting them to rentals. increasing the rental supply. In other words, Caitlyn found evidence that her hypothesis that this would be a boon for renters was right.
And she found a few years later, there was this period when in these Sunbelt neighborhoods with lots of these large landlords, the sale price of the houses actually fell. So the opposite of what people fear. She says this surprised her. She still doesn't know exactly why it is, but she pointed us to some other research that she says might help explain it.
Basically, as more renters came into neighborhoods, they changed them.
You have a kind of a diversification effect in that the people who move in, the renters who move in to neighborhoods tend to be younger, more minority status, lower wealth. And so that's really a story of rentals unlocking neighborhood opportunity for a subset of renters who couldn't have bought into that neighborhood. Got it.
If those renters look very different from the incumbent homeowners and they value different local goods and services, then you end up seeing outmigration of some of the incumbent homeowners as well.
Caitlin says she's hoping to study this more to figure out what exactly is going on.
So that's two different periods Caitlin discovered when housing prices were lower in areas with more institutional ownership. In one, rents were lower and the other, sale prices were lower. But Caitlin did find one period in recent history when areas with high concentrations of large investors saw both higher rents and higher sale prices.
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