Welcome to DU! The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards. Join the community: Create a free account Support DU (and get rid of ads!): Become a Star Member All Forums Issue Forums Culture Forums Alliance Forums Region Forums Support Forums Help & Search

mahatmakanejeeves

(56,897 posts)
Mon Apr 22, 2013, 08:17 AM Apr 2013

Wall Street betting billions on single-family homes in distressed markets

Source: Washington Post

By Michael A. Fletcher, Apr 22, 2013 12:27 AM EDT

The Washington Post 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.”

Read more: http://www.washingtonpost.com/business/economy/wall-street-betting-billions-on-single-family-homes-in-distressed-markets/2013/04/21/ac4bdefc-a2e1-11e2-9c03-6952ff305f35_story.html



"Forget it, Jake. It's Chinatown."
24 replies = new reply since forum marked as read
Highlight: NoneDon't highlight anything 5 newestHighlight 5 most recent replies
Wall Street betting billions on single-family homes in distressed markets (Original Post) mahatmakanejeeves Apr 2013 OP
du rec. nt xchrom Apr 2013 #1
Next crash, coming up... MannyGoldstein Apr 2013 #2
That's actually true Yo_Mama Apr 2013 #12
Let's catch them out for a change. Refuse to buy or rent from them, so THEIR houses crash on point Apr 2013 #3
Somebody needs to cut off Wall Street's supply of helium. Quickly. marmar Apr 2013 #4
Take away their Offshore Tax Loopholes and the Free Ride is over FreakinDJ Apr 2013 #7
People without jobs is what lost the houses in the first place. Unless those same people have good patricia92243 Apr 2013 #5
Wall Street will not be stuck with anything. OnyxCollie Apr 2013 #13
Exactly. Recent events have encouraged wall street to make BIGGER risky bets. hughee99 Apr 2013 #14
Is this a bad thing? pipoman Apr 2013 #6
That makes sense, except I have a feeling that the rich buyers are djean111 Apr 2013 #8
When the banks created the distress and then profit from it, it's a problem Tom Rinaldo Apr 2013 #9
yes...it is a bad thing noiretextatique Apr 2013 #15
Yeah, I feel ya.. pipoman Apr 2013 #20
i am looking right now also noiretextatique Apr 2013 #22
They are doing it here too. Cleita Apr 2013 #10
But betting $0, in creating jobs for people in order for them to purchase said homes,,,,,,,,,, benld74 Apr 2013 #11
no, but they won't be sharing any wealth noiretextatique Apr 2013 #17
Our elected officials look toward their insider trading opportunities, rather than protect us from midnight Apr 2013 #16
It explains gutting the STOCK Act. OnyxCollie Apr 2013 #18
It does seem so obvious.... And your link indicates this move about two weeks ago... These guys midnight Apr 2013 #19
As usual, wrong President jackmccabe May 2013 #23
Welcome to DU. OnyxCollie May 2013 #24
What could possibly go wrong ? MikeW Apr 2013 #21

Yo_Mama

(8,303 posts)
12. That's actually true
Mon Apr 22, 2013, 11:22 AM
Apr 2013

Declining household incomes and higher debt levels have left the first-time buyer prospects extremely sensitive to price.

In the areas where these investors are doing the most business, they are buying houses and raising the average price significantly. They are also putting so much into that rents are even falling in some of these areas, which is the reverse of what's supposed to happen. But when they stop buying and start selling, the markets are going to become imbalanced again and prices will drop. This will leave some of those first-time buyers underwater again. It's not a pretty picture.

Further, interest rates are lower than they were in the GD and its wake, so now we have the prospect of an interest rate increase coinciding with another market flooding event.

People don't realize how incomes have shifted for first-time buyer prospects. On this census page you can download table H.9, which gives household median income history by age bracket. You have to scroll down and take the "all-races" one H-9 one:
http://www.census.gov/hhes/www/income/data/historical/household/index.html

For the 25-34 bracket, which is most important for initial home purchases, real median household incomes fell from $58,007 in 2000 to $50,774 in 2011 (most recent data). That's 12.5%. You can't have this and have a stable housing market.

I think that the median household incomes are improving for this bracket now, but improvement is not going to be swift, and behind the scenes, the 2% FICA increase has cut their "real" incomes further this year.

For the 35-44 bracket, real median household incomes over the same period fell from $70,216 to $61,916, or 13.8%.

Home prices are going to tend to fall rather than rise over the next 20 years. Even in very "good" active markets, you can't expect home prices to do anything but stagnate except for the top-line areas.

This age bracket also faces higher insurance costs, on average (older population means that medical costs rise on average per capita), and continuing high "basic needs" prices, as well as tax increases on the state, local and federal levels. So real disposable incomes will be further constrained.

Any time you have home prices diverging this far from incomes, you have built up problems in the system. In this case, the problems will be exaggerated by high student debt levels and a rebound in mortgage rates to at least 4.5%.

on point

(2,506 posts)
3. Let's catch them out for a change. Refuse to buy or rent from them, so THEIR houses crash
Mon Apr 22, 2013, 08:33 AM
Apr 2013

and they are left holding the bag. (empty)

Star a movement, that makes it distasteful to buy from the bloodsuckers

or only offer them 50 cents on the dollar

patricia92243

(12,590 posts)
5. People without jobs is what lost the houses in the first place. Unless those same people have good
Mon Apr 22, 2013, 08:48 AM
Apr 2013

paying jobs,they will not be buying from anyone and Wall Street will be stuck with them. And, it will serve them right.

 

OnyxCollie

(9,958 posts)
13. Wall Street will not be stuck with anything.
Mon Apr 22, 2013, 12:02 PM
Apr 2013

They'll lobby the government to take the crap off their hands.

hughee99

(16,113 posts)
14. Exactly. Recent events have encouraged wall street to make BIGGER risky bets.
Mon Apr 22, 2013, 12:22 PM
Apr 2013

The government won't bail you out for just a few million. If you're going to lose, lose BIG.

 

pipoman

(16,038 posts)
6. Is this a bad thing?
Mon Apr 22, 2013, 08:49 AM
Apr 2013

I have been an antiquer for decades. I sometimes go to estate auctions and listen to the other collectors bitching about antique dealers there buying stuff. I always viewed it as if I purchase something and a dealer was the under bidder, I did OK...the dealer believed there was still profit to be made at his/her last bid, so I must be a little below retail..

Same may be true for housing. If a bank for instance buys a distressed property, they will have to hire every nail driven, whereas a homeowner can save on labor by doing some of the work themselves, hiring smaller contractors, negotiating for the work, buying reduced price materials through good shopping, etc. When all done, a resident buyer, or even a small investor will be into the property at a lower price than their big business bank hiring a big business general contractor..

will it create another bubble? Don't know...we're quite far from that right now..

 

djean111

(14,255 posts)
8. That makes sense, except I have a feeling that the rich buyers are
Mon Apr 22, 2013, 09:10 AM
Apr 2013

not going to do much work on the houses. The banks can't
be bothered to pay taxes on repossessed homes, much less fix them up.
Most bank repos are sold as is.
It would, of course, be great if there were suddenly lots of jobs for local contractors - but I have a feeling that will be outsourced. I have gotten three different offers to buy my house - one Wall Street firm actually bragged that they are undercutting first time and low income buyers - but I threw them out. I am not underwater, but owe enough that a lowball price won't be enough to get me into a better home. Not that mine is bad. I was one of the three people in the United States that got a free refi from Wells Fargo - honestly, when I got the papers in the mail I thought it was a trick! - so I doubt I can do better elsewhere.

That all being said, Wall Street is evidently free to do whatever it wants while all in Washington eat fancy dinners and count campaign funds, so all we can do, IMO, is watch.

Tom Rinaldo

(22,911 posts)
9. When the banks created the distress and then profit from it, it's a problem
Mon Apr 22, 2013, 09:35 AM
Apr 2013

In the large sense anyway. When they win coming or going, and never face prosecution, there is every incentive for them to keep playing fast and loose with economy.

noiretextatique

(27,275 posts)
15. yes...it is a bad thing
Mon Apr 22, 2013, 01:16 PM
Apr 2013

the very people who manipulated the market is now profiting from that manipulation. it's criminal in every sense of the the word, but apprently not illegal.

 

pipoman

(16,038 posts)
20. Yeah, I feel ya..
Mon Apr 22, 2013, 08:36 PM
Apr 2013

I remember Japanese investors buying up real estate, paying big money, until the market turned and they got their asses handed to them..

I still feel it is a great time for young people to buy a nice home for a reasonable price...assuming they are able to keep work of coarse..I was encouraged last week when a young man who works in my kitchen qualified for a mortgage and bought a house..awesome..they deserve it..

noiretextatique

(27,275 posts)
22. i am looking right now also
Tue Apr 23, 2013, 03:13 PM
Apr 2013

i am expecting a settlement soon, so i hope to take advantage of the market. i live in the bay area of california, and trust me, investors are going to make a killing here. there are so many cheap properties; they can just flip them as is and make a profit. i hope there are more mom and pop types benefiting from this mess, like your co-worker, instead of 1% types.

Cleita

(75,480 posts)
10. They are doing it here too.
Mon Apr 22, 2013, 10:45 AM
Apr 2013

One of our local stations is doing a show on how to make money flipping properties here due to the "new opportunities" available in the current real estate market.

midnight

(26,624 posts)
16. Our elected officials look toward their insider trading opportunities, rather than protect us from
Mon Apr 22, 2013, 01:17 PM
Apr 2013

this crash....

 

OnyxCollie

(9,958 posts)
18. It explains gutting the STOCK Act.
Mon Apr 22, 2013, 04:15 PM
Apr 2013

Obama administration pushes banks to make home loans to people with weaker credit

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.

Read more: http://www.washingtonpost.com/business/economy/obama-administration-pushes-banks-to-make-home-loans-to-people-with-weaker-credit/2013/04/02/a8b4370c-9aef-11e2-a941-a19bce7af755_singlePage.html

http://www.democraticunderground.com/?com=view_post&forum=1014&pid=442628

midnight

(26,624 posts)
19. It does seem so obvious.... And your link indicates this move about two weeks ago... These guys
Mon Apr 22, 2013, 04:28 PM
Apr 2013

move mighty fast when it lines their own pockets don't they....

jackmccabe

(1 post)
23. As usual, wrong President
Mon May 13, 2013, 01:05 PM
May 2013

If you change the President's name either to William Clinton or George Bush, you'll have made an accurate statement.

Housing values/wealth are shifting from middle class and lower class to the affluent upper class US and international, plain and simple.

To think otherwise is to ignore history.

Latest Discussions»Latest Breaking News»Wall Street betting billi...