Foreclosure Crisis Still in Full Play

Good article on CounterPunch called There’s Still a Foreclosure Crisis. . . excerpt below, full article at the link:

“… if lenders turn their REO release valve to full blast, the deluge of foreclosures cascading onto the market could plunge the country into a recession, said Thomas Martin, president of consumer advocacy group Americas Watchdog.

“If they let the dam essentially break. It could be a catastrophic disaster for the U.S. economy,” he said, predicting that some major banks would fail and home prices would nosedive by 20 percent.

That doomsday scenario has many industry professionals supporting lenders’ tactics of holding onto most of their REOs. Otherwise, they would be “causing the floor to fall out from underneath the entire market,” Faranda said. He added that banks don’t have the manpower to push the paperwork required to put all their foreclosures on the market.” (“‘Shadow REO’: As Many as 90% of Foreclosed Properties Held Off the Market, Estimates Suggest”, AOL Real Estate)

So, the banks are deliberately keeping the majority of distressed homes “off market” in order to keep prices artificially high, fleece another generation of credulous buyers, and effect the appearance of a revitalised and soaring housing market. Now–tell me–which part of this equation even vaguely resembles a “free market”? It’s all central planning by a criminal bank cabal that controls all the levers of state power lock, stock and barrel.

Even so, it looks like John Q Public has swallowed this latest load of public relations malarkey judging by data that shows that sales of new and existing homes are gaining pace. Ahh, but looks can be deceiving. A closer inspection of the data suggests that it’s not Mr. Public who’s buying all those homes, but deep-pocket speculators who’ve piled into the market seeking short-term gains. Check this out from Bloomberg:

“Transactions involving investors jumped 75 percent in November from a year earlier in 25 metropolitan areas tracked by Radar Logic Inc. It’s a market that could total 12 million homes, JPMorgan analysts led by Anthony Paolone wrote in a note last month.

Blackstone, the largest U.S. private real estate owner and the only firm with more homes than Hughes, has spent $3 billion on rentals, Jonathan Gray, Blackstone’s global head of real estate said today at a Credit Suisse Financial Services Forum in Miami. Blackstone said last month it spent $2.7 billion on 17,000 properties, accelerating purchases as prices rose faster than anticipated…

The New York-based firm, which started buying single-family houses last year, has bought so quickly it’s “warehousing” more than half of the inventory as it completes purchases, renovates and rents the properties, Gray said in January…

Whether the single-family rental market grows from “a $10 to $20 billion market to a $100 to $200 billion market” will depend “on how successfully institutional investors are able to execute over the next few years,” Bordia said.” (“Billionaire Hughes Chasing Blackstone as U.S. Rental King”, Bloomberg)

Get the picture? It’s a speculator feeding frenzy featuring some of Wall Street’s biggest names all plunging into the sharkpool at the same time. The only thing missing from this bizarre mix is the traditional young couple looking to partake in the American dream by buying their first home or the move-up buyer who wants to use the equity he’s built up over the last decade to buy that 3-bedroom Tudor in the country. Normal “organic” buyers have vanished from the marketplace while ravenous speculators are grabbing everything that isn’t bolted to the floor. Naturally, that’s pushed prices higher while creating the illusion of a thriving market.

But what do these investors really have in mind? Are they planning on becoming responsible long-term landlords committed to serving the needs of the community after the devastation they caused by crashing the financial system in 2008?

In your dreams! Here’s more from Bloomberg:

“New York-based JPMorgan, whose private bank oversees $877 billion, started pooling investments from its clients in mid- 2012 into a partnership to purchase distressed properties, betting that prices will rise over the next several years and provide investors with income from renters along the way, said Lyon…

The goal is to sell the houses within three to four years in one of three ways: through an initial public offering of a real estate investment trust, a sale to an existing REIT or to an institutional buyer such as a pension fund, Lyon, who’s based in San Francisco, said. Clients will receive a share of any price appreciation depending on the size of their investment.” (“JPMorgan Joins Rental Rush For Wealthy Clients: Mortgages”, Bloomberg)

There you have it. The banks are only going to hang-around long enough to see prices surge, then they’re going to dump their inventory back on the market so Mom and Pop can see their equity go down the drain for the second time in a decade. Nice, eh? Speculators aren’t interested in building a strong and sustainable housing market, what they’re looking for is a sharp jolt to quarterly profits, so they can nab that new Maserati Gran Tourismo for those long drives to the Hamptons.

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