Big Money Buying Up Our Homes Is "Never Going To Stop" | Ken McElroy

"Wall Street is coming for Main Street"

Many of the recent housing analysts I've talked with, like in last week's excellent interview with mortgage expert Melody Wright, see tougher times ahead for the real estate market.

So for further context, I thought it would be helpful to get a true "boots on the ground" view from one of America's more successful property investors.

What is he seeing across the thousands of property units in his portfolio?

Is he buying, selling, or holding steady given current market conditions?

And where does he see the housing market headed from here?

For answers, we turn to Ken McElroy, founder and CEO of real estate investment and property management firm MC Companies.

Ken expects increasing supply to weigh on most real estate sectors (SFH, multifamily, office, etc) between now and 2026, depressing prices. While that will be painful for owners, he plans to increase his acquisition pace from here on as valuations improve.

To see the real estate market through an operator’s eye, click here or on the image below:

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Adam’s Notes: Ken McElroy (recorded 5.13.24)

EXECUTIVE SUMMARY:

• Ken describes the market as "a tale of two economies," with the single-family market slowing due to rising interest rates and the commercial market experiencing a lot of current pain (though not in all sectors). In both cases, he expects future supply to rise while demand continues to soften — at least through 2026.

• He warns of a Lag Effect because construction projects started in 2020-2021 are just now hitting the market. So in the near term, supply will keep increasing. But rising costs and interest rates have slowed new starts, which will result in a significant drop-off in new projects 3 years from now.

• Ken anticipates an oversupply of multifamily properties in former red-hot markets like Austin, Dallas, and Phoenix due to the large number of projects initiated when rates were low, which will benefit renters (finally!) in coming years, but will pose increasing headwinds for developers and builders.

• With rising home prices and increased investor activity, the US is moving toward a "renter nation" in Kenny’s view. The gap between the cost of homeownership and renting is the widest it has ever been which drives