D. McHattie

What REALLY Caused the Mortgage Crisis - And What to Do Now

I agree with most of the article but disagree about REITs.

Housing supply is housing supply and we have too much of it.

Many homes currently stand vacant as they await sale or foreclosure. These units will eventually come back on the market, purchased either by

1) a renter, to live in, thus reducing demand for rental units
2) an investor, to rent out, thus increasing supply of rental units

Yes, former owners become renters but many of these units were purchased as 2nd homes and investments so their vacancy does not have a correlative increase in demand for rental units.

Also, many of these young former owner-occupiers will share rental units with roommates so they constitute less demand for rental units than they add to supply.

Any way you look at it increased demand for rental units will not keep up with increases in supply.

Econ101 says equilibrium price will fall in this environment.