Wall Street’s Rental Bet Brings Quandary Housing Poor – Bloomberg 08-29-13

Salient to Investors:

Private-equity firms, hedge funds and REITs have bought more than 100,000 US homes, becoming dominant single-family landlords in markets hardest-hit by the housing crash such as Atlanta.

Christopher Thornberg at Beacon Economics said investors that are building home-rental companies may not want to take on the red tape, stigma of renting to poorer tenants and the potential extra costs. Thornberg said that as the markets become more saturated with rentals, you may find these investors going to a Section 8 model, if they don’t sell, simply because they don’t want these houses sitting empty.

Raphael Bostic at the University of Southern California said these investors are not really rental people but transaction oriented and are buying houses for the potential value appreciation as much as the rental cash flow, and may be reluctant to commit to Section 8 tenants because those leases come with long-term constraints that reduce the ability to sell quickly.

More than 7 million Americans that lost their houses to foreclosure and the US homeownership rate is the lowest since 1995.

RealtyTrac said institutional investors bought 24 percent of homes sold in the Atlanta region in half1 2013, the most of any metro area, and up from 12 percent a year earlier.

CoreLogic reports 49,000 completed foreclosures in July, down 25 percent from a year earlier.

Jeff Pintar at Pintar Investment said investors that shun some of the 2.2 million Americans with federal vouchers in certain regions risk higher vacancy rates and lower yields.

Susan Popkin at the Urban Institute said Section 8 has the connotation of poor people of color moving into my neighborhood, but research shows no evidence they bring crime to a community or hurt property values.

Susan Wachter at Wharton said over the long-term, affordable housing will be harder to find as government subsidies fail to keep pace with demand, rents continue to rise and new construction falls behind population growth. Wachter said rents have increased through the recession and vacancies have declined so it’s unlikely to be a market where rents stabilize or decline long-term.

Read the full article at  http://www.bloomberg.com/news/2013-08-29/wall-street-s-rental-bet-brings-quandary-housing-poor.html

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