How Wall Street Has Turned Housing Into a Dangerous Get-Rich-Quick Scheme—Again
Last edited Fri Dec 13, 2013, 03:26 AM - Edit history (1)
You can hardly turn on the television or open a newspaper without hearing about the nation's impressive, much celebrated housing recovery. Home prices are rising! New construction has started! The crisis is over! Yet beneath the fanfare, a whole new get-rich-quick scheme is brewing.
Over the last year and a half, Wall Street hedge funds and private equity firms have quietly amassed an unprecedented rental empire, snapping up Queen Anne Victorians in Atlanta, brick-faced bungalows in Chicago, Spanish revivals in Phoenix. In total, these deep-pocketed investors have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.
Wall Street's foreclosure crisis, which began in late 2007 and forced more than 10 million people from their homes, has created a paradoxical problem. Millions of evicted Americans need a safe place to live, even as millions of vacant, bank-owned houses are blighting neighborhoods and spurring a rise in crime. Lucky for us, Wall Street has devised a solution: It's going to rent these foreclosed houses back to us. In the process, it's devised a new form of securitization that could cause this whole plan to blow up—again.
Since the buying frenzy began, no company has picked up more houses than the Blackstone Group, the largest private equity firm in the world. Using a subsidiary company, Invitation Homes, Blackstone has grabbed houses at foreclosure auctions, through local brokers, and in bulk purchases directly from banks the same way a regular person might stock up on toilet paper from Costco.
In one move, it bought 1,400 houses in Atlanta in a single day. As of November, Blackstone had spent $7.5 billion to buy 40,000 mostly foreclosed houses across the country. That's a spending rate of $100 million a week since October 2012. It recently announced plans to take the business international, beginning in foreclosure-ravaged Spain.
http://www.motherjones.com/politics/2013/11/wall-street-buying-foreclosed-homes
and we wonder why housing prices are increasing in certain areas of the country ....
======================================================================================
The only reason wall street is blowing this bubble is because they make more money renting homes than lending money to purchase homes ...
I have said it before and I will say it again,
SOMEBODY OTHER THAN BANKS HAVE TO LEND MONEY TO AMERICANS TO PURCHASE HOMES .... the banks have become like insurance companies, keep them away from the consumer ... or they will sell you rape insurance but only if your credit score is above 750 ... cmon America, we can do better than this ...
BELOW IS THE MOST DANGEROUS SCENARIO FOR ANYONE RENTING TODAY FROM WALL STREET !!!!!!!!!!!!!!!!!!!!!!
"There's one significant way, however, in which this kind of security differs from its mortgage-backed counterpart. When banks repossess mortgaged homes as collateral, there is at least the assumption (often incorrect due to botched or falsified paperwork from the banks) that the homeowner has, indeed, defaulted on her mortgage. In this case, however, if a single home-rental bond blows up, thousands of families could be evicted, whether or not they ever missed a single rental payment."
"We could well end up in that situation where you get a lot of people getting evicted... not because the tenants have fallen behind but because the landlords have fallen behind," says Baker.