Monday, April 22, 2013

Trying to Buy a Single-Family Home? Good Luck Beating Wall St. on Deals

I have reported on this in the EPJ Daily Alert. On October 8, 2012, I wrote in the ALERT.
[A major Silicon Valley operator]  responded by telling me that from the research they have conducted they also felt the housing market  would soon recover. In fact, they told me they have formed a partnership that is buying entire housing portfolios from  banks.  "We are looking for  dumb bankers," is how the son put it to me. 
Obviously, these guys have very good data on what is going on in the housing sector. They told me that there is some shadow inventory that isn't showing up in the data, but not a lot, and once that is cleaned up, they expect housing prices to start climbing even more aggressively[...] I am
generally not a big fan of house ownership, but this is one of those unique periods where I view them as exceptional buys, especially with mortgage rates as low as they are.  Now, is the time to buy housing and lock in these low rates long-term
Here's Michael Fletcher with WaPo now reporting the story, months later and with housing prices much higher:
Big investors are pouring unprecedented amounts of money into real estate hard hit by the housing crash, bringing those moribund markets back to life but raising the prospect of another Wall Street-fueled bubble that won’t be sustainable.

Drawn by the prospect of double-figure profit margins on rents and the resale of homes whose prices plummeted in the crash, hedge funds, Wall Street investors and other institutions are crowding out individual home buyers.

If the chain of easy credit and dangerous leverage that started on Wall Street fanned the housing bubble and eventual crash, some analysts find it disturbing that major investors are the ones snapping up the bargains — and eventual big profits — left in its wake[...]

Real estate executives say institutional investors — who in some cases are bidding on hundreds of homes a day — account for as much as 70 percent of sales in some Florida markets. Over the past two years, analysts say, they also have accounted for a majority of purchases in other parts of the country where housing prices are rebounding sharply.

The influx of investors may explain why home prices have been rising in parts of the country most affected by the housing crash, despite high jobless rates and relatively few new mortgages being issued by lenders. In the past year, prices have risen 23 percent in the Phoenix area, 15 percent in Las Vegas, 9 percent in Tampa and 11 percent in Miami, according to the Case-Shiller home-price indices . Nationally, prices are up more than 8 percent over the past year.


  1. yes but who are they going to sell or rent those places too? other slower bigger institutional investers?