That didn’t take long. Mortgage purchase applications are at 14 year lows, but home prices had miraculously risen by double digits last year. The Wall Street Muppet Fleecing Machine has been in full fuck America mode for the last two years, taking free Bennie Bucks and becoming landlords to the ignorant masses. This priced first time buyers and real Americans out of the home market. But that’s all right. Wall Street shysters were able to pay themselves $26.7 billion in bonuses for fucking over the people once again. At least prices in the Hamptons will stay elevated.
What we do know id that Wall Street is filled with lemmings. Their little MBA created financial models are all blinking red right now. That means sell. They have stopped buying and are now seeking the greater fools and clueless dupes. One problem. The average American is dead broke. Ask Radio Shack, Sbarro, JC Penney and Sears.
There are no buyers for what Wall Street wants to sell. Look out below folks. Housing crash 2.0 has arrived. Those paper gains over the last two years are going to vaporize. POOF!!!! Like they never even happened. Thank Bennie, Janet, Jamie, Lloyd, Fink and the rest of the psychopathic assholes on Wall Street. They make Gordon Gekko look like an upstanding citizen.
Guest Post by David Stockman
The Wall Street Home Buying Binge Is Over….Already!
It seems like only yesterday I was lamenting the arrival of housing bubble 2.0 and the Fed’s nefarious policy of distributing ZERO-COGS (i.e. nearly zero short-term borrowing costs) to Wall Street speculators— which had then swooped into busted housing markets from Phoenix to Florida looking for the next big carry trade. This stampede of $5,000 suits riding John Deere lawnmowers into the likes of Scottsdale AZ had commenced less than 24 months ago, but already it had levitated prices by 25-50 percent in some of these markets.
It had also given rise to rivers of ink in the financial press about a “new asset class” called “buy-to-rent” single family homes. Right on time, it had already resuscitated Wall Street’s meth labs of financial innovation, which were busy “slicing and dicing” single-family rental streams into this year’s favorite flavor of toxic waste.
I also ventured the guess that these new Harvard Business School ”landlords” would turn tail and run the minute prices stopped bounding upward because it was all a speculative frenzy, not an investment program, in the first place. They self-evidently had no core competence in managing 200,000 single family homes scattered all over America’s sand belt suburbia. In a post called “Housing Bubble 2.0 ” I further suggested:
“The idea that Colony Capital of Los Angeles or Blackstone of Park Avenue posses magical economies of scale in the nationwide single family rental market is just plain bonkers…..(this time) instead of millions of Main Street speculators who believed up to the very end that housing prices would rise to the sky, we now have a few thousand institutional speculators who will head out of town on their John Deere’s as fast as they came….”
Actually, that was all said, well, yesterday! Today a Bloomberg headline updated the story:
”Home Buying Binge Ends as Prices Surge”
Bloomberg reported that:
Blackstone Group LP (BX) is slowing its purchases of houses to rent amid soaring prices after a buying binge made it the biggest U.S. single-family home landlord. Blackstone’s acquisition pace has declined 70 percent from its peak last year, when the private equity firm was spending more than $100 million a week on properties”’(and) investing $8 billion since April 2012 to buy 43,000 homes in 14 cities…..”
As for the new “asset class” that only a few months ago was being touted as a sure bet for $1 trillion status, the #1 real estate honcho in all of Wall Street and long time head of Blackstone’s hit-and-run real estate campaigns, Jonathan Gray, told Bloomberg quite succinctly:
“The institutional wave has passed…..It’s at a much lower level than it was 12 or 24 months ago.”
Well, that’s bubble finance at work. Home prices in hundreds of Sunbelt cities had been painfully brought down to earth during 2008-20011. Affordability based on sound mortgage underwriting and honest household income was being slowly restored. Yet right then and there the lunatic QE policies of the Bernanke-Yellen claque catalyzed Wall Street’s short-lived housing stampede. In the process, honest wage-earners got squeezed out of the market and the get-rich-quick contagion was once again unleashed in America’s suburban expanse.
So the questions recurs: Does our arrogant monetary politburo have the slightest idea what it is doing? Sadly, the Bloomberg headline makes the answer abundantly clear. The Eccles Building is clueless!
Blackstone Group LP Global head of real estate Jonathan Gray
“All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from their former want of honour or virtue, so much as from the downright ignorance of the nature of coin (currency), credit (dent+ interest) and circulation (velocity of money).”
John Adams
Blackstone’s Home Buying Binge Drops 70% from its Peak Last Year
Posted on March 14, 2014 by Mike Krieger
The whole story about how private equity firms and hedge funds have steamrolled into the residential home market to become this decade’s slumlords is a story covered on this blog before mainstream media even knew it was happening. I first identified the trend in January of last year in one of my most popular posts of 2013: America Meet Your New Slumlord: Wall Street.
Since then, I’ve done my best to cover the various twists and turns in this fascinating and disturbing saga. Some of my follow up pieces can be read below:
March 2013: Is the “Buy to Rent” Party Over?
May 2013: Carrington Bails: More Smart Money Leaves the “Buy to Rent” Game
July 2013: The Las Vegas Housing Market has Gone Full Chinese
August 2013: Welcome to the Housing Recovery: Rents are Rising, Incomes are Falling
October 2013: A Closer Look at the Decrepit World of Wall Street Rental Homes
February 2014: Is “Buy to Rent” Dead? – Rents on Blackstone Housing Bonds Plunge 7.6%
With all that in mind, let’s now take a look at the latest article from Bloomberg, which points out that Blackstone’s home purchases have plunged 70% from their peak last year. Perhaps they overestimated the rental cash flow potential of indebted youth living in their parents’ basements?
From Bloomberg:
Blackstone Group LP is slowing its purchases of houses to rent amid soaring prices after a buying binge made it the biggest U.S. single-family home landlord.
Blackstone’s acquisition pace has declined 70 percent from its peak last year, when the private equity firm was spending more than $100 million a week on properties, said Jonathan Gray, global head of real estate for the New York-based firm. After investing $8 billion since April 2012 to buy 43,000 homes in 14 cities, the company has narrowed most of its purchasing to Seattle, Atlanta, Miami, Orlando and Tampa.
President Barack Obama credited the investors for helping put a floor under the plunging housing market and consumer advocates such as the National Community Reinvestment Coalition later blamed them for soaring prices in some cities.
While institutional purchases nationwide fell to a 22-month low in January, corporate investors were more active in the Atlanta region, buying 25 percent of homes sold, according to data firm RealtyTrac. That helped drive up Atlanta prices 37 percent since the March 2012 trough.
Now read this fantastic article from real estate analyst Mark Hanson, who points out that homes are much less affordable now that they were at the peak of the most recent housing bubble.
Never fear serfs, now that homes have once again become unaffordable, the banks are bringing back subrpime loans so that Blackstone can sell back to the muppets.
Ah, crony capitalism at its finest.
Full article here.
In Liberty,
Michael Krieger
Stockman hit it on the head Admin.
Being a landlord is not a flipping business, and you need to be on top of your assets. Who will buy all these units when the music stops? Are these 43,000 home owned outright or finance by the gov’t.
Consumers are tapped out and in debt beyond reason. Millenials are a “lost generation” for the housing market as 1/3 can’t even afford to rent and live in their parents basement. The oligarch’s greed will be their undoing. They and the government has fleeced the public. The game of musical chairs is about over.
#1 Real disposable income per capita continues to fall. In the fourth quarter of 2012, it was sitting at $37,265. By the time that the fourth quarter of 2013 had come around, it had dropped to $36,941. That means that average Americans have less money to go shopping with than they did previously.
#2 In January, real disposable income in the U.S. experienced the largest year over year decline that we have seen since 1974.
#3 As disposable income decreases, major retailers are closing thousands of stores all over the country. Some are even calling this “a retail apocalypse”.
#4 From September 2013 to January 2014, the personal saving rate in the United States dropped by a staggering 16 percent.
#5 During the fourth quarter of 2013, we witnessed the largest increase in consumer debt in this country that we have seen since 2007.
#6 Fewer Americans are applying for mortgages these days. In fact, the MBA Purchase Applications Index is now the lowest that it has been since 1995.
#7 Overall, the rate of homeownership in the United States has fallen for eight years in a row.
#8 Many Americans are finding it increasingly difficult to afford a new car or truck. The following comes from a recent CNBC article…
A new study shows the average household in 24 of America’s 25 largest metropolitan areas cannot afford to pay for the average priced new car or truck.
“Just because you can manage the monthly payment doesn’t mean you should let a $30,000 or $40,000 ride gobble up such a huge share of your paycheck,” said Mike Sante, managing editor of Interest.com. “Many people are spending money on a car payment that they could be saving.”
#9 Incredibly, 56 percent of all Americans now have “subprime credit” at this point.
#10 Total consumer credit has risen by a whopping 22 percent over the past three years.
#11 In the third quarter of 2007, the student loan delinquency rate was 7.6 percent. Today, it is up to 11.5 percent.
#12 Overall, U.S. consumers are $11,360,000,000,000 in debt.
#13 While Barack Obama has been in the White House, median household income in the United States has fallen for five years in a row.
#14 U.S. workers are taking home the smallest share of the income pie that has ever been recorded.
#15 One recent study found that about 60 percent of the jobs that have been “created” since the end of the last recession pay $13.83 or less an hour.
#16 Middle-wage jobs accounted for 60 percent of the jobs lost during the last recession, but they have accounted for only 22 percent of the jobs created since then.
#17 According to one recent survey, only 35 percent of all Americans say that they are better off financially than they were a year ago.
#18 In 2008, 25 percent of all Americans in the 18 to 29-year-old age bracket considered themselves to be “lower class”. In 2014, an astounding 49 percent of them do.
#19 The poverty rate in America has been at 15 percent or above for 3 consecutive years. That is the first time that has happened since 1965
http://www.zerohedge.com/news/2014-03-14/19-signs-us-consumer-tapped-out