What’s Up With the Housing Market?

Brett Roper, CFP®, AIF® |

As comprehensive financial planners, we at RPJ are constantly reviewing portfolios and tracking our client’s Net Worth.  In the last few years, we have seen increasing home values on the Asset side of the balance sheet while the Liability side decreases slightly as loan payments are made.  For those clients who do not own real estate we are hearing the same questions: when and how can we afford to get into this housing market?

Let’s get to some facts.

Who owns the real estate in the US?  There is a misconception that more and more Institutional money is snapping up the available homes in the US.  You have likely heard of Blackrock or Blackstone.  However, these Institutions own less than 1% of the more than 100+ million single family homes in the US according to John Burns Real Estate Consulting:



Ok, then who is buying real estate? John Burns Consulting has another graph showing purchase share by year for investors going back to 2002:



Real estate investors were buying 12% of homes back in 2002.  That number has increased to 25% towards the end of 2021 and again in Q1 2024.  Surprisingly it is not big financial firms purchasing this real estate – instead, it mainly consists of smaller mom and pop type investors buying a rental house or two as an investment property. 

As you can see in the chart below, large Institutions now make up just 2% of purchases.  This is down from a high near 5% at the peak in 2022:


The theory behind this activity from small mom and pop investors is they took advantage of historical low mortgage rates to invest in residential real estate.  There are plenty of homeowners who don’t want to let go of their ~3% mortgage so they turned to rental real estate by renting out an existing home once they purchased a newer one.

John Burns estimates rental home investors are back up to owning nearly 10% of all homes in America, only slightly higher than 9% share in 2005.

So if private equity is not to blame for the current housing market, then what is?  Let’s look into the recent history around housing:

  • 2005-2007 = housing bubble based on rising home prices and subprime mortgages (very loose lending standards)
  • 2007-2008 = housing bubble burst + home prices crashed + homebuilders went bankrupt
  • 2008-2009 = financial crisis + lending standards tightening
  • 2010s = homebuilders never really came back into industry + housing starts never really recovered

The end result is we did not build enough homes needed for the coming wave of millennial home buyers.  We saw an uptick in housing starts during the low 3% mortgage days but current mortgage rates of 7% are beginning to slow things down again.

Zillow estimates the US has a shortage of 4.3 million homes.  Some pundits want to blame the Fed and rates, stating that maintaining higher rates has only driven down supply of existing homes for sale.  If the Fed lowers rates, it could increase demand from buyers who have been sitting on the sidelines.

However, these actions by the Federal Reserve or legislatively by the Federal Government cannot increase housing inventory overnight.  Likewise, with current home builders increasing supply in the span of 6-12 months, it just takes time to build housing.

JPMorgan estimates it would take roughly 3.5 years to restore housing affordability:


Just like the stock and bond markets, real estate will go through its cycles.  Right now, the data points to a supply-demand issue keeping home prices afloat during higher-than-average mortgage rates.  As rates come down and more housing is built, we should see home values soften as more housing comes available.  Note – the US is a large geographical area, and certain pockets of the country will have more construction than others resulting in different changes in home prices across different time periods.


If you have more questions on how to ride out the shortage or want help saving for a home, give us a call!




John Burns Research & Consulting:  https://jbrec.com/

Zillow:  https://www.zillow.com/

JPMorgan:  https://www.jpmorgan.com/global

Ben Carlson:  https://awealthofcommonsense.com/


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