More and more evidence is piling up that a big chunk of the single family housing resurgence is due to institutional investors of a sort. Which is creating a paradox – many private owners-to-be who rely on conventional mortgages are being crowded out of the market by big buyers with buckets of cash.
To name but a few:
n Title Capital Management is helping big investors scout, buy and manage homes in Florida. The company has plowed more than $100 million into residential real estate for investors in the past year, and is on course to spend $250 million to buy an additional 2,000 homes in 2013, according to the Washington Post. The firm bids on about 200 houses a day, making it one of the largest players in Florida that help hedge funds and other Wall Street firm buy distressed properties.
n Who are those firms? Private equity groups like Blackstone, which in the past year has amassed a portfolio of 20,000 rental homes worth $3 billion. Another, American Homes 4 Rent, owned by warehouse magnate B. Wayne Hughes, has purchased approximately 10,000 rental properties, according to news reports.
n Delavaco Residential Property Trust in Fort Lauderdale says it is scooping up many homes for $60,000 to $70,000 – a fraction of the building costs. After some repairs, the company rents them out for as much as $1,700 per month.
Delavaco co-founder Dallas Wharton says investors are propping up the market, and asks where the bottom would be in neighborhoods. The alternative, he says, is that they “sit there and rot.” Others disagree, saying well monied investors are crowding out those families who want a chance at the American Dream – home ownership.
“Investors are making it hard for a regular homeowner to buy a property,” says Robert Ruscotto, a broker with Better Homes and Gardens Real Estate in Fort Lauderdale. “They are getting outbid by people with cash.” He notes that out of some 20 home sale contracts he has in process, 17 of the buyers are major investors.
Before the housing crash, big investors almost never wanted single family homes, largely because of slow returns and the money-draining hassle of managing tenants in often far-flung properties. But with prices still depressed and with low interest rates and high stock prices limiting prospective returns elsewhere, major investors see the prospect of healthy profits in single family homes.
Time will tell whether this is a good thing…..