Want lower home prices? Cut incentives for house investors

Basic economics tells you that if you lower the demand for a product, the price should fall.

Limiting financial incentives for housing investors could increase the share of homes owned by the folks who live there.

Consider a new study from the American Enterprise Institute. It notes that favorable financing available to small-scale house investors nationwide may provide 10% more buying power than traditional mortgages offered to the general public.

The study asks “whether federal mortgage finance policy should subsidize small-scale investors competing for the same starter homes sought by first-time buyers, particularly when government-backed credit lowers investors’ cost of capital and strengthens their ability to outbid first-time borrowers for starter-home stock.”

Yes, it’s not Wall Street giants gobbling up a wannabe homeowner’s shot at the American dream. Investors of all sizes create competition for California house hunters, particularly in the state’s more affordable communities.

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