Does Wall Street Home Buying Hurt You?

Wall Street Buys HousesQuestion: Wall Street firms are buying up huge numbers of single-family homes. How does this impact private home buyers?

Answer: We usually think of single-home real estate investors as local people who buy several properties and keep them over time or as rehabbers who buy properties, fix them up and then quickly re-sell. The entry of Wall Street firms into the single-home market — as opposed to apartment ownership — is something new.

The so-called “buy-to-rent” or “BTR” market generally includes six major firms according to a 2013 report from Morgan Stanley. Such firms have purchased some 78,000 properties nationwide. Morgan Stanley says the BTR market could expand to more than $100 billion during the next few years, about six times its current size.

In late 2013 Bloomberg News reported that the industry leader, the Blackstone Group, had paid $7.5 billion to acquire 40,000 homes during the past two years.

So how does this impact the real estate marketplace?

First, despite apparently-big numbers the size of the BTR market is inconsequential on a national basis because existing home sale activity is huge, perhaps reaching 5 million units annually.

Second, the BTR companies are largely active in the major foreclosure centers — Florida, Nevada, Arizona and California. The more homes that are bought in such areas — regardless of who or what buys them — the better for all owners because more buyers equal more demand and more demand pressures home values higher.

Third, seen another way, the BTR movement is largely non-existent in many markets.

Fourth, if you’re a buyer where BTR firms are active you may face additional competition. However, these companies are largely in the buy-in-bulk, fix-up, hold-long business. An individual house in good shape at fair market value may not hold much interest for them — but may be ideal for you.

Overall, it’s good that Wall Street is investing in local real estate and buying up foreclosures and short sales, properties usually sold at discount. They’re keeping money within our borders. Moreover, a smaller inventory of distressed homes means less pressure to hold down prices — something most of us favor.


Syndicated originally to newspapers nationwide by Content That Works; revised, modified, updated, and posted with permission.

Technorati Tags: , , , , , , , ,

Posted in: News

Post a Comment