MIAMI — 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.
“There is the possibility that Wall Street and the banks and the affluent 1 percent stand to gain the most from this,” said Jack McCabe, a real estate consultant based in Deerfield Beach, Fla. “Meanwhile, lower-income Americans will lose their opportunity for the American Dream of building wealth through owning a home.”
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 indice. Nationally, prices are up more than 8 percent over the past year.
“I don’t know whether things are as good as they seem to be. A lot of properties are being occupied by institutional investors, not the end-user,” said Scott Kranz, co-principal of Title Capital Management, a firm that helps big investors scout, buy and manage homes in Florida. “The end-user would need to see a great increase in jobs, availability of mortgage money and a loosening of the reins that have been holding them back. But all the economic indicators are that we are not at that point.”
And of course as the housing market tightens and the rental market tightens, prices go up for both rentals and sales.
Too bad there are no jobs to sustain those kinds of levels.
This housing bubble ended so well last time that you have to ask, what could possibly go wrong this time?
One more example of how the 1% screw the rest of us.
When the investment banks start securitizing the purported rental income stream from these deals, then you know the bubble has reached the bursting point.ReplyDelete
The banks know there is a limited time in which to get in and out of this real estate play. They're going to securitize it all and off-load the bonds to the rubes at the pension funds, well before the weasel goes pop.
The pattern repeats over and over and over...Delete
The big banks did the same during the Great Depression...after the crash, they bought all the properties up from the destroyed....Theres a reason why the concept of interest was once thought immoral...then the shylock society began...ReplyDelete
It would be nice if we got back to that society where interest was thought immoral once again. It would be so much better than the shyster system we live in now.Delete
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