An article by Shabnam Bashiri, which originally appeared on Alternet:
http://www.salon.com/2013/02/07/the_housing_recovery_is_a_myth_partner/
“The Blackstone group, the biggest player in the new REO to rental market, has spent $2.5 billion in the last year purchasing 16,000 homes, a number that amounts to over $100 million per week. Property records show that many of the homes Blackstone has acquired in Fulton County over the last few months were purchased on the courthouse steps at the monthly foreclosure auction, or through short sales—when a lender agrees to accept less than the amount owed on a loan. The vast majority of these homes are not empty, but occupied by homeowners who fell behind during the great recession.”
http://www.bloomberg.com/news/2012-07-03/blackstone-makes-foray-into-houses-for-rent-mortgages.html
“Blackstone, which has loaded up on strip malls, warehouses and suburban office buildings in the past two years, is turning to residential real estate after a 34 percent plunge in prices since the 2006 peak. The New York-based company is the biggest investor seeking to enter the single-family leasing market as rents climb and the U.S. homeownership rate sits at a 15-year low, joining rivals including KKR & Co. (KKR) and Colony Capital LLC. “
http://www.blackstonefl.com/asset-managers.asp
“Our core focus is to help lenders minimize their losses and exposure with defaulted assets in Florida by using the team approach to provide accurate and timely broker price opinions, and to effectively and efficiently maintain and aggressively market real property assets.”
How Paulson Does Well
“Paulson paid Goldman Sachs another $15 million to design collateralized-debt obligations comprised of specific subprime mortgages that he selected. This bucket of investments may have included loans that he knew were unsound and were made only because banks were strong-armed by the CRL. It also may have included loans that he knew would be undermined by the CRL’s extensive lobbying activities. Until there is a full investigation, we won’t know for sure, but it appears Paulson’s $30 million – split between the CRL and Goldman Sachs – financed a scheme that netted his fund a cool $1 billion dollars.”
Maddie's Mom says:
http://video.foxbusiness.com/v/2152193259001/hovnanian-we-cant-build-homes-fast-enough/
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12th February 2013 at 9:27 am
Novista says:
Maddie’s Mom
Thanks for the link. “Florida is really hot … ” Ah yes, the state where robosigning surfaced. I wonder how many of these sales are to foreigners.
Well, there’s even more fun & games afoot.
from Bill Bonner, writing in The Daily Reckoning:
“Look at Blackstone. One of the houses they bought – probably much like the others – was purchased for $90,000. It has a mortgage on it of $200,000. The former owners are still living in it. Instead of a mortgage, they’re now paying rent. Now they’re serfs.
“Do the maths. If they bought the house in 2005, they probably had a 6% mortgage. 6% of $200,000 is $12,000. Add in another, say, $3,000, amortisation and charges and they probably had a monthly payment of about $1,250.
“Now, the suits take over. Thanks to the conniving of other suits at the Fed, they are able to borrow for, perhaps, 3.5%. Let’s add another $10,000 to their purchase price (closing, taxes, maintenance…) to make the maths easier. That gives them a monthly capital cost of less than $300 per month. And, because these guys have big hearts as well as big wallets, they reduce the renter’s monthly payment to only $1,000.
“Everybody comes out ahead. The former homeowners don’t have to move. They save money each month. And Blackstone, which may have only about $10,000 of its own money in the deal, earns…are you ready for this…as much as $6,000 net per year…or about a 60% rate of return on its cash.
“But wait. It gets better. Because Blackstone is not counting on a real bull market in housing. Nope, the geniuses at Blackstone are making a big bet on interest rates. At no extra cost, they have gotten a free option. They’re short the bond market in a major way. When bonds finally go down (perhaps they’ve already begun)… Blackstone is going to get another big jackpot.”
Meh.
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12th February 2013 at 10:30 am
sangell says:
I think these hedge funds are going to find out what a lot of small investors already know. Rental housing is a lot more than just a projected cash flow based on monthly rents. Unless you can find the perfect tenant, in my experience it is a middle aged woman with a decent job, no boyfriend and who likes to garden, its a lot of work maintaining rental properties. Need a new thermocouple on the furnace or the bathroom sink gets clogged either you fix it or you pay a plumber $150 to do the job. A small operator can get away with being choosy as to whom they rent to but big operators can get hit with discrimination suits initiated by ‘testers’ who like deep pocket investors.
No one has ever tried to manage several thousand single family homes as rental properties before. I don’t see any economies of scale here only diseconomies that small investors don’t have.
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12th February 2013 at 11:24 am
Stucky says:
Of course there is no recovery. Is INCOME rising or declining? In its simplest terms, that’s all one needs to know.
MEDIAN GROSS INCOME (Annual) ———- $44,000.
times … 20% tax rate —————– $8,800
equals Annual Net Income ————- $35,200
equals Monthly Net Income ————– $2,933
minus Credit Report Debts (car payments, student loans, credit cards) —— $500
equals Monthly Net Income after debts ——— $2,433
times Maximum Allowable Ratio ———————- 45%
EQUALS — MAXIMUM TOTAL MORTGAGE PAYMENT —- $1,095
Note; “total mortgage payment” means principle and interest PLUS taxes AND homeowners insurance AND association fees. So, in a state like NJ where $1,000 a month taxes is not at all unusual, a $44,000 annual income qualifies you for $95 …. or, a pup tent from Dick’s Sporting goods.
In a “cheaper” state the above person could afford (barely) a home for $125k, assuming an interest rate of about 4%. If interest rates rise — and they will eventually – say to 7%, then that person better hope they can find their dream home for $85,000, or less.
There will be a housing recovery if builders convert railroad box cars into homes. A nice quaint 600 sq ft McMansion for $32,000.
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12th February 2013 at 11:52 am
Mary Malone says:
The fraud just never ends, does it?
There are 66 million mortgages which have clouded title. I guess Blackstone is hedging their bets on a national Quiet Title Action initiative when they scoop up the lion’s share of these homes.
At this point, so many homeowners are in the dark about title on their homes, Blackstone can cherry pick the best properties in the best neighborhoods for the highest rate of return.
If you do not have clear title to your home, you are a renter, whether Blackstone owns it or not.
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12th February 2013 at 1:15 pm
flash says:
But ,still we serfs are living pretty large on the monarchy’s dime…when rents permanently outpace the ability to pay, then we’ll see the real cost of servitude invoked .
The Serf Society
by Bill Bonner
“Paycheck to paycheck.” That’s the way serfs live. In someone else’s house. On someone else’s money. Often driving in someone else’s automobile. And sometimes even sitting on someone else’s furniture.
Got a health problem? Oh, yes – check into someone else’s health system.
Want an evening out at a restaurant? Put it on a credit card; let someone else pay for it.
Serfs don’t necessarily live poorly; they live badly. Because they’re not in control of the resources they need to live well. They are dependent, not independent.
We saw an ad for a new Smart car. “Just $199 a month,” said the ad.
People don’t own cars anymore. They just lease them… or not even. A lot of young people use Zipcar – a car-sharing service by which you “rent” a car using your iPhone. You never go to a rental agency or see a rental agent. You get a code via iPhone. You use the code to unlock the car. Easy. Peasy.
Some young people we know don’t own anything. They say it’s “liberating.” But that is something else. Not owning anything can be a smart financial strategy. But not owning a house because it was foreclosed… and not owning a car because you can’t afford one… does not sound very smart.
The Suits Take Over
http://lewrockwell.com/bonner/bonner567.html
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12th February 2013 at 1:28 pm
Mary Malone says:
OK – this is a cautionary tale on just how screwed up property title is in America these days.
A Pennsylvania couple is ready to retire. They buy their dream home in Florida in an online auction for $65K. They move in, spend money fixing it up, only to come home one day and see a foreclosure notice posted on their door.
Now, they paid cash for the home. They had a title search done.
The problem?
There was a second mortgage on the property that the title company never picked up on. The bank with the second mortgage foreclosed.
The couple had to sue their title company who paid the $65K. But they did not recover any of the costs of fixing up the home.
They were lucky that the claim was paid and they at least got their $65K back. In the near future, nobody is going to get their money back from the title companies, because the policies do not cover clouded title from electronically recorded liens (AKA MERS).
http://www.abc-7.com/story/21087747/couple-evicted-from-their-dream-home
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12th February 2013 at 4:13 pm
Work-In-Progress says:
Mary,
What is your analysis of the DC area? As in, was it hit with robo signing and are there lots of clouded titles here?
Prices are still going crazy.
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12th February 2013 at 4:31 pm
Mary Malone says:
@WIP The fraud is everywhere I’m afraid. It’s just not as apparent in hotter markets like DC, cause the parties bubble up and wreak havoc only when the homeowner falls behind in their payments.
If the payments flow in and the values increase, then the fraud is hidden for the most part.
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12th February 2013 at 11:30 pm