America has a fraud problem.
Scientific studies are mostly irreproducible, and mostly find what the grant-issuers hoped to find. Because of fraud.
Our social safety-net programs are overwhelmed... not really because we have too many disabled, poor, and old people, but because we have a staggering parasite-burden of people collecting benefits fraudulently: lying about eligibility, collecting checks for dead people, etc. And then, on the other end, hospitals and insurance companies, as well as other contractors, conspire to defraud those programs on the payment end.
Our elections are compromised by vote fraud.
Our national budget is bloated beyond all reason by fraud.
Colleges are rife with it, from fraudulent admissions to fraudulent loan and grant applications, to fraudulent coursework and embezzled budgets.
Building contractors habitually underbid and hide shoddy work.
Nearly every attempt to reform public schooling-- incentives to improve schools and raise literacy-- leads not to higher literacy, but to testing fraud.
And down here where it hurts: we have epic levels of real estate fraud.
This study put out by the Philly FED office estimates that a third of the "effective investor population" is people committing occupancy fraud: in other words, they are lying about being investors (rather than regular people just trying to buy a house to live in), in order to take advantage of the mortgage rates, downpayment assistance programs, and other programs meant to help normal non-investor people buy a house-- programs that exist explicitly to help normal working people who want to live in a house, get a leg up on investors in a fraught housing market. I was trying to wrap my head around this number, and it's difficult, but it's possible to get some vague, sketchy outlines of the problem from various sources. A third of the effective investor population is huge, but also... to grasp that we'd need some idea of the size of the investor population to start with. Is that an available number? Average number of investment properties owned by average landlord: about two. But does that average tell us anything real? The guy who bought an entire apartment building almost certainly did *not* commit occupancy fraud: it'd be hard to claim you're buying 80 apartment units to use as your primary residence, and programs for first-time homebuyers are unlikely to front that much money. So the majority of that fraud is likely taking place in single-family home sales, which are the majority of rentals.
This site helpfully gives us some numbers. Are they accurate? I have no idea. Best I can do. They say that 25% of single family homes in the US are owned by investors. That's way bigger than I thought it would be. Since the wealthier you are, the more likely you are to actually own the house you live in, I expect that percentage is much higher down at the bottom end of the rental market-- where we are. Which goes a long way toward explaining why, every time we tried to buy a very modest house in a somewhat sketchy neighborhood, we were relentlessly and immediately outbid by investors. It also notes:
"Over the last decade, the percentage of investors purchasing single-family homes has steadily increased each year. From 2010, where investors accounted for only 10% of single-family home purchases, to 2019, where the percentage rose to 15%"
and
"in 2020-2021, investor purchasing of single-family homes experienced a significant surge of over 80%. This surge can be attributed to historically low mortgage rates resulting from the COVID-19 pandemic. The combination of low prices and low-interest rates created a favorable environment for investors to expand their portfolio of single-family homes.As of 2022, investment companies now own approximately one-fourth of all single-family homes."
Which explains an awful lot of what we've been dealing with in our failed attempts to exit renter-hood. During the height of the covid real-estate frenzy, 80% of home sales were to investors who actually admitted to being investors. That's settled down to around 40% since. But think about that a moment: if, as the FED says, a third of the people buying homes who claim not to be investors... are actually investors and lying about it, that could be something like 86% at peak, and 60% now, of single-family home sales to investors, not to people who want to live in a home they own. Most of the homes being sold are going to investors, not occupants. If that continues, that 10% of single-family homes that has ballooned to 25% in recent years, will keep growing.
Possibly, the numbers are smaller than that for fraud, simply because the really large investors like Blackrock are doing their thing with endless FED funding, not mortgages. They don't need to stoop to petty occupancy fraud when they can milk the taxpayer wholesale. But, they're not buying in my neighborhood. They're targeting up-and-coming city suburbs, and houses above our range. Which means a
greater proportion of the sales in our price range probably involve fraud, as that's likelier to be smalltime wannabe REI bros who went to a weekend seminar about passive income and came out with dollar signs flashing in their eyes at the prospect of collecting rent checks and never working again.
That's infuriating, of course.
But at the same time... I guess I can stop feeling like a failure for still renting. All this time, the four years we've been trying, on and off, to buy a house, I've felt like... were we being naive? Were we missing some crucial information? Were we doing it wrong?
We looked at our finances back around 2018, realized we were on a dead-end path, worked out the numbers for what we'd have to do to fix that and escape the low-income can't-afford-to-live-anywhere trap, we lived on fairy tears and unicorn farts for two years to send my husband back to school, we nearly tripled our household income, hauled our family up into median income range (even a bit above median for our state!), exceeded all our financial targets (and those targets included what it'd take to buy a house... in 2018) and... now we're in the same bind as before, except we're renting instead of living with relatives. And that's because the goalposts moved, the dollar lost at least 25% of its value in that same timeframe, house prices nearly doubled, grocery prices went up by 30%, rents went up by a similar margin, and... it turns out we were having to compete as honest people in a market overrun by fraud.
So... at least it wasn't us?
It does feel like it's time for another 2018-level re-assessment, though. If the hole just keeps getting deeper, we've got to find a way to keep ahead of it.