Tags: housing | recovery | investors | driving

Big Money Investors Seen Driving Housing Recovery

By John Morgan   |   Friday, 14 Dec 2012 08:00 AM

The nation’s housing market appears on a clear upswing at last, a phenomenon being driven by hedge funds, private equity firms and other investors rather than owner-occupants, CBS Moneywatch reported.

The fact the Federal Reserve is keeping prime borrowing rates at historically low levels means investors are finding it difficult to obtain good returns on traditional vehicles such as savings accounts and bonds. That has led professional investors to move aggressively to buy single- and multi-family homes, according to CBS Moneywatch.

Unlike ordinary homebuyers, investors tend to pay cash and buy in bulk when they purchase real estate. The result is slowly rising home prices and shrinking housing stock.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

“It’s clear that the bulk sales to investors have reduced the property overhang in for-sale property, which is a positive,” Stuart Gabriel, director of the University of California, Los Angeles’ Ziman Center for Real Estate, told CBS Moneywatch. “It’s helped in absorbing that inventory, which has helped stabilize the market. It’s obviously put a floor under prices.”

Professional investors are also helping drive new home construction by backing regional homebuilders. Their apparent strategy is to rent the houses over five to seven years, and then sell them when the market is stronger.

“We’ve got an environment where the availability of mortgages has never been tighter,” Rob Simmons, former chief financial officer of online brokerage E-Trade Financial, told CBS Moneywatch.

“This is creating opportunity for investors to come into market and provide a bridge until the jobs market and other things improve enough so that individual buyers can start buying again.”

Other evidence of a housing recovery is also growing.

The Los Angeles Times reported that the Southern California housing market — a key region that helped lead the steep national downturn in housing — is now on an upward trajectory.

The number of homes sold climbed more than 14 percent in November from a year earlier to the highest level for any November in six years, the Times said. The median home price in the region rose to $321,000, up nearly 17 percent since November 2011.

“More buyers feel confident about their jobs, the economy and the likelihood housing prices have bottomed,” said John Walsh, president of real estate research firm DataQuick.

All-cash purchases, many by deep-pocketed investors, remained “unusually high,” according to the Times

According to the most recent Fiserv Case-Shiller data, the housing market during the spring and summer of this year was the strongest since the housing bubble peak in 2006. Industry figures showed home prices were up in more than half of the 384 metro area markets in the United States in the second quarter of this year.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

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