What is the biggest change happening within our real estate market? Investors Buying up bad mortgages and shadow inventory. I am not talking about these local investors that call us agents up to identify a good buy here in the SLV.I am referring to MAMMOTH sized Investors.
Remember this new catch phrase!
“Buy-To- Rent” or “Buy-Renovate-To-Rent”
Shadow inventory refers to real estate properties that are either in the process of foreclosure and subject to potential short sale or are already “owned” by banks or GSEs. In either case, these properties are “in the shadows" and not "on the market" but will be sometime in the future.
Recognize that Shadow Inventory has declined significantly and that is a crucial aspect to the big picture. http://www.realestateeconomywatch.com/2013/03/the-shadow-inventory-is-slowly-disappearing/
Bloomberg reported that REITs (Real estate investment trusts), private equity firms and hedge funds have spent more than $20 billion to acquiring these homes in just the last 12 months. They have purchased tens of thousands of homes and turned them into rentals. WSJ reports that China is also investing in this manner.
Banks have become more sophisticated in managing their inventory of short sales than in years past. As a result they are more measured in the pace at which they are putting these properties back into the market. Additionally, they are not in as big a hurry to release inventory when prices are rising faster than cinnamon rolls near a wood stove.
Who are some of the MAMMOTH investors? American Homes 4 Rent (AMH), the second-largest single-family landlord after Blackstone Group (BX), Barry Sternlicht’s Starwood Waypoint Residential Trust, and Altisource Residential (RESI) are stepping up acquisitions of nonperforming loans, or NPLs, to expand their holdings of homes to operate as rental properties.
After raising more than $20 billion in capital last year to purchase rental homes, are buying mortgages as banks face new regulations that make it more expensive to hold their shadow inventory. The Department of Housing and Urban Development is also auctioning loans to stem losses at the financially troubled Federal Housing Administration.
SF Examiner article: The large-scale loan purchases raise concern among housing advocates that residents may be displaced or transformed into renters of their former houses, according to Kevin Stein, associate director of the California Reinvestment Coalition, a San Francisco-based tenant and consumer advocacy group. “They should be modifying those loans to keep the homeowner in there, but it runs counter to their business model,” Stein says. “They shouldn’t be in the business of buying distressed loans for the purpose of foreclosing on people.”
Douglas Brien, co-chief executive officer of Starwood Waypoint, says his company, who has spent $over $100 million on nonperforming loans since 2012 has plans to give delinquent residents a chance to stay put as owners or renters. “Our intent is to approach some of these folks where it just doesn’t look like they’re going to get caught up on their loans,” he says. The company can “offer them the opportunities to stay in their homes and keep their kids in the same school.”
Brien estimates that 30 percent to 50 percent of the NPLs will end up as rentals for the company.
So now will you rememeber this new catch phrase!
“Buy-To- Rent” or “Buy-Renovate-To-Rent”
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