Big investors are pouring money into areas hardest hit by the real estate bubble and subsequent crash caused by, well, them. “Dead Beat” homeowners can hardly be blamed for the most recent crash in the housing market. That must certainly be reserved for those on Wall Street who provided the pitfall of easy credit and dangerous leverage. Now they are moving back in while preventing families, newlyweds, and first time home owners from actually moving in anytime soon.
This is a foul tasting irony. One where institutions, hedge funds and banks will be crowding out home buyers in search of double digit gains now that their greed has succeeded in driving down prices to present levels.
Alluvial Fund performance update for the month ended May 2021. Q1 2021 hedge fund letters, conferences and more Dear Partners and Colleagues, Alluvial Fund, LP returned 5.4% in May, compared to 0.2% for the Russell 2000 and 1.0% for the MSCI World Small+MicroCap . . . SORRY! This content is exclusively for paying members. SIGN UP Read More
“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.”
Something one of my most favorite authors, Christopher Moore, would deem, “F…kery most heinous.”
This institutional investing is responsible for up to 70 percent of home sales in some Florida markets where a number of companies are purchasing as many as a hundred homes each day. This same type of investment has been responsible for sharply rebounding housing markets in other parts of the nation as institutional investors have bought the majority of houses over the last two years.
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. At the same time, each of these areas is still experiencing high jobless rates and little increase in new mortgages. Given the climate in each of the aforementioned cities, its apparent that investors are not just putting the squeeze on younger generations but looking to take a bite out of people’s retirement funds as well, as they move from colder environs to stay erect and live forever on the golf course.
“The investors are making it hard for a regular homeowner to buy a property,” said Robert Russotto, a broker with Better Homes and Gardens Real Estate in Fort Lauderdale. “They are getting outbid by people with cash.”
On a related note, Warren Buffett told CNBC in February that he would buy “a couple hundred thousand” homes if it was practical. I would like to think it’s not practicality but his conscience and his legacy that is stopping him. Even with his vast fortune, there isn’t enough Purell to sanitize one man’s hands from a purchase and hold of that size.