FORT LAUDERDALE, Fla., April 22 (UPI) — Investment firms are scooping up homes in distressed real estate markets, like Florida, blocking out individual bidders, experts say.
“There is the possibility that Wall Street and the banks and the affluent 1 percent stand to gain the most from this. Meanwhile, lower-income Americans will lose their opportunity for the American dream of building wealth through owning a home,” said Jack McCable a real estate consultant in Deerfield Beach, Fla.
The Washington Post reported Monday that some big investors are submitting bids for hundreds of homes a day, muscling in on about 70 percent of the market in certain areas.
“The investors are making it hard for a regular homeowner to buy a property. They are getting outbid by people with cash,” said broker Robert Russotto, at Better Homes and Gardens Real Estate in Fort Lauderdale. Fla.
Russotto said he had 20 deals in the works and 17 of them were purchases by institutional investors.
One company, Title Capital, researches homes and assesses them for the size, the price and any special features they may have, does a quick legal check, searching for liens — and ends up with bids on 200 properties a day, the Post said.
RealtyTrac said one out of every 104 homes in Florida received a foreclosure filing in January through March of 2013.
That will put a lot of of them up for grabs at rock-bottom prices.
And more inventory is on the way. Close to half of Florida’s homes are considered underwater, which means that homeowners owe more on the mortgage than the value of the property. That situation prompted many homeowners to opt for foreclosure in recent years to avoid pouring money into a perceived sink-hole.
The conditions could be considered ironic. Banks that wrote risky subprime mortgages and investors that bought securities and derivatives set up the financial crisis that caused the housing market to go bust.
As a result, millions of jobs were lost and banks tightened restrictions on lending. So many people who were forced out of their homes are now blocked from returning to home ownership while cash-rich investors are buying the properties out from under them — and pushing prices higher.
When jobs return, the investors are expected to cash in on the increased home prices and get out of the rental market.
“If I had a way of buying a couple-hundred-thousand single-family homes, I would load up on them. It’s a very attractive asset class now. I could buy them at distressed prices and find renters,” said billionaire investor Warren Buffett in 2012.
Equity firm Blackstone Group came to the same conclusion. It now owns 20,000 rental homes worth $3 billion, said Peter Rose, a spokesman for the company.
Florida is not the only state where investment firms are driving up the price of properties.
Home prices in the past 12 months are up 23 percent in the Phoenix area and 15 percent around Las Vegas.
There is considerable worry that investment firms, banking on low interest rates, are creating another housing bubble — but many of them are paying cash, which explains why prices are soaring in some areas, but lending to homeowners is flat, the Post said.