How investment firms are threatening the housing market

Institutional buyers are snapping up houses at a feverish pace and keeping some potential homeowners out of the market. Rising mortgage rates could be to blame. 

|
Steven Senn/AP/File
A for sale sign hangs in front of a house in Walpole, Mass. last month. Institutional buyers are snapping up homes, taking up their largest share of the housing market in two years

A young client of mine told me he and his wife had been outbid on a handful of houses this past spring, despite the fact that they had literally begun showing up to see homes for sale with a checkbook and engineer in tow. They couldn't figure out who it was buying up all the properties in the upper middle class enclave in which they hunting.

Turns out, it was private investment firm, paying cash. This meant no mortgage contingency, which is music to a seller's ears. In some cases, homes were being bought over the phone, their realtor told them.

Bloomberg tells us that this phenomenon hasn't stopped yet...

"Home purchases by institutional buyers reached a record high in September and all-cash buyers accounted for almost half of sales as investors responded to rising demand from renters.

Institutional purchases accounted for 14 percent of sales, according to a report today from RealtyTrac. That was the highest share since the real estate data firm began in 2011 to track transactions by that group, which it defines as buyers of 10 or more homes a year. All-cash sales rose to 49 percent from 40 percent in August and 30 percent a year earlier, a sign that rising mortgage rates since May have kept some people out of the market and that smaller investors are stepping up purchases."

Ten years ago, we were told to become owners.

Now we're all supposed to be renters.

Endless ZIRP and QE has certainly helped home prices, but it's introduced a new predator into the housing ecosystem, one that shows no sentimentality when scooping up property whatsoever.

Just as the Federal Reserve intended, I'm sure.

Chalk up another 'W' for the holders of financial assets.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to How investment firms are threatening the housing market
Read this article in
https://www.csmonitor.com/Business/The-Reformed-Broker/2013/1025/How-investment-firms-are-threatening-the-housing-market
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe