Housing Market–Not a True Rebound

I agree with this article which states that the so-called housing recovery is "just a facade fueled by Wall Street."  Most people do not realize that houses are being bought today PREDOMINATELY by investment firms which purchase hundreds of homes at a time, and convert them into rental properties.  This article spells it out as well as explaining WHY first-time buyers are being squeezed out of the market.  ....Dennis

As More People Rent, Housing Rebound Questioned

Real estate market experts are questioning the sustainability of the rebound in the U.S. housing market. They reason that investment firms and individual investors, and not those who would use the houses as a residence, have bought a significant number of homes. Therefore, it can’t be considered a true rebound of the housing market. 

The quantity of home purchases by investors “raises the question of whether rising home prices really indicate a sustained market recovery, or if the growth is just a facade fueled by Wall Street,” a Daily Finance article states. 

The article ends with a cautionary note: “The most important takeaway is that the underlying housing environment may not be as rosy as Wall Street has made it out to be.” 

Investors buy many homes and convert them to rental properties, and first-time buyers are priced out of the market. First-time buyers can’t compete with investment funds that are flush with cash. 

Historically, first-time home buyers are an important factor in a rebound. However, the National Association of Realtors (NAR) states that the number of first-time buyers dropped from approximately 40 percent over the past three decades to 30 percent in the last year, which doesn’t bode well for the real estate market, according to a report by the Consumerist. 

It isn’t only that first-time buyers have been squeezed out of the market because of investors, but rigid underwriting standards, larger down payment requirements, and high student loan debts are also part of the equation.

Additionally, a recent increase in mortgage rates is another driver of the real estate market slowdown. This makes it more difficult to borrow in the long term. 

For example, a 30-year fixed-rate mortgage was at 3.80 percent in September 2012 and has risen to 4.75 percent by September 2013. The 15-year fixed rate mortgage changed from 3.09 percent to 3.82 percent during the same period. 

Renter Nation 

The large housing inventory has decreased significantly since the height of the recession. However, a significant number of homes were not bought by individuals, but by investment firms.

For example, the Blackstone Group L.P., a multinational investment firm, “has been busy buying up scores of single-family homes at dirt-cheap prices, fixing them up, and then turning around and renting them out,” according to a recent Street Authority Daily report. 

The renter’s market has hit a 16-year high, according to a Census Bureau and Bank of America Merrill Lynch Global Research report. 

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