I had an e-mail this morning from someone wanting me to sign up for a short-sale course for Realtors. In order to convince me, for some reason, she included the following scary article, attributed to the Wall Street Journal and Bloomberg News. The bolding for emphasis is mine.

------------- ... Investors are swooping in and buying and accounting for most of the rise in sales.

"While the purchases are trimming the inventory of unsold properties, most of those bought by speculators will likely return to the market when prices rise again, hampering any recovery", said Nobel laureate economist Joseph Stiglitz and Yale University Professor Robert Shiller in interviews.

"We're creating a shadow inventory of homes that will be right back on the market as soon as the economy and the housing market begin to improve," said Stiglitz, a Columbia University professor of economics. "We could see a double-dip in the housing recession if that happens."

... The repossessed properties offer opportunities for investors, who typically buy homes at auction and rent them out until prices increase and they can sell.

"These speculators are preventing the market from crashing now, and when they get out it could fall again." said Shiller, who helped create the S&P/Case Shiller real estate price indexes

Dario Moscoso of San Diego bought a three-bedroom foreclosed house in San Diego three weeks ago for $490,000, half of what it would have fetched a year ago. He's renting it for $2,500 a month and plans to sell when prices rebound. "We hope to put it back on the market in about a year," Moscoso, 52, said in an interview. "We'll gauge the market and see how it goes."

The "speculative fervor" is returning in the market in part because investors have the edge in buying foreclosures, said Dean Baker, co-director of the Center for Economic and Policy Research. Baker said he considered buying a Washington home at a foreclosure auction last year until he learned the terms of the sale. Winning bidders had to complete the deal within 30 days, half the time of a standard home purchase, or lose their deposits. It was a risk he didn't want to take.

"Regular homebuyers are excluded from the foreclosure market because the rules favor professional investors and that lack of competition is driving down prices," Baker said.

"In past housing recessions, we didn't see as many mortgages under water, so it didn't matter if the focus was on speed and not on maximizing value," Stiglitz said. "Now, the same banks that created the problems by mismanaging their risk are mismanaging the disposal of their assets."

"If you're a first-time buyer with a young family, do you really want to buy a home sight unseen and risk losing your down payment?" Stewart said, minutes before starting a foreclosure auction in Boston. "Investors know how to close a deal quickly and they don't care what it looks like -- they're either going to rent it or flip it." ------------

So lenders and investors are conspiring to ice home buyers out of the market and slow down the housing market recovery?

This seems strange to me, since I work with so many residential investors. They're having trouble getting mortgage programs at a decent interest rate and have to put down at least 20%. There's no FHA or VA program for investors except on VA repos. Last fall, I had one investor--active-duty military--meet all the qualifications for a VA vendee loan, but Ocwen still required 20% down instead of the low down payment advertised. He forfeited his application fee.

I suppose investors could find cash or hard money to buy properties at auction vs. trying to get a mortgage. But how does rehabbing and/or renting a house--improving a neighborhood and offering a home to someone who can't afford to buy--contribute to the downfall of our society? If prices rise again, they would have to rise quite a bit to cover the acquisition and rehab costs. And if the investor has good tenants in the property, why would they want to sell anyway?

Should lenders sell their properties only to home buyers? Should investors be charged a premium for buying residential real estate? And is it true that investors don't even want to look at the properties they bid on?

What do you think?

(This terrific photo of an investor inspecting a Texas house up for auction is by DanielJames.)