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I'll probably be keeping this video in mind the next time I'm trying to get a new home haha
Bank buys a house and lists it at 10% markup, never sells it. Bank buys another house and lists it at 10% markup, never sells it. Bank buys another house and lists it at 13% markup, never sells it. Bank then records an 11% increase in its balance sheet value at the end of the year and uses the money to borrow from the Fed at 5% while buying municipal bonds at 8%. The municipalities tax the real estate to pay for the bonds, thereby enshrining the price of housing in the public record and creating a collective financial incentive to never let these houses get sold for less than their inflated price.
If we ever see a serious downturn in the real estate market (like in '08 or '16) we just flood the market with cheap money again. Lather, rinse, repeat. If you end up with a few ghost investment cities dotting the country, where vacant buildings are piling up at prices nobody can afford... oh well. Maybe the throngs of homeless people should have just worked harder in order to afford them.
Bank buys a house and lists it at 10% markup, never sells it. Bank buys another house and lists it at 10% markup, never sells it. Bank buys another house and lists it at 13% markup, never sells it. Bank then records an 11% increase in its balance sheet value at the end of the year and uses the money to borrow from the Fed at 5% while buying municipal bonds at 8%. The municipalities tax the real estate to pay for the bonds, thereby enshrining the price of housing in the public record and creating a collective financial incentive to never let these houses get sold for less than their inflated price.
If we ever see a serious downturn in the real estate market (like in '08 or '16) we just flood the market with cheap money again. Lather, rinse, repeat. If you end up with a few
ghostinvestment cities dotting the country, where vacant buildings are piling up at prices nobody can afford... oh well. Maybe the throngs of homeless people should have just worked harder in order to afford them.Don't forget that you can sell them at less than their "value" and get to claim a "loss" to keep tax burden low!
Manage the dumping of houses at below "market value" and the bank can milk the write offs for quite some time.
Oh... AND they can still rent them out for passive income.
Its a win win situation!
Ghost cities are an American phenomenon (and ghost towns too, historically speaking; gee, wonder why).
Where can I read more about that real estate > debt > bond cycle? It sounds really important to understand.