The policy makers in this country have spoken: There will be no assistance to those in foreclosure. We will not help Americans avoid foreclosure. We will not help to delay or stop foreclosure. Instead, we will work with the banks to throw American families into the street so that we can sell their home for pennies on the dollar to investors.
Now for the first couple months, there has been a bit of an investor frenzy with prices being bid up. But the bloom has started to fall off that onion and investors are admitting what I’ve said all along:
Investors are paying far too much for the homes they’re buying at foreclosure auctions!
The numbers they have been quoting, and the prices they have been paying do not cover the cost of holding, much less maintaining….and certainly not improving…the real estate they are buying. That means the assets they are holding will be declining in value. And once a decline starts in real estate…..that decline is very difficult to stop.
And so at some point in time we’ll all get around to asking the question….
Why won’t we modify mortgages in the same terms we will sell these homes to private investors?
FORTUNE ““ When the U.S. housing market crashed in 2007, millions lost their homes to foreclosure. With their finances in shambles, they picked up the pieces by renting rather than buying. Big institutional investors quickly caught on, snapping up foreclosed properties on the cheap and renting them out.
All this has helped drive the recovery we’re seeing today: Investors effectively absorbed the excess inventory of homes for sale, which in turn has helped push home prices higher. Prices for rentals have also risen rapidly, as families who either lost their homes or put off buying found rentals to live in.
While this has gone on for some time, the investor frenzy might have peaked. Rents for single-family homes have essentially flattened — rising just 0.1% in March from a year earlier, according to a report released Thursday by real estate listing website Trulia. What’s more, in some cities where investors had the biggest appetite for properties on the cheap, rents have fallen: Take Los Angeles, where rents fell 1.9%; rents in Orange County slipped down 0.7%; Las Vegas saw a 1.9% drop. And in two other key investor markets — Atlanta and Phoenix — single-family home rents remained flat, rising less than 1%.
Meanwhile, rents for apartments have continued to rise, climbing 2.9% in March from a year earlier.
FORTUNE MAGAZINE
