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3 May 2013

Wall Street’s housing frenzy in full swing

The common folk are feeling the surge of big wig real estate investors specifically in Nevada where houses are being bought in upfront cash. Those who plan on dabbling in the current trend of buy-now-and-sell-later can hold their money because they are up for some competition.

Many big ticket firms fueled by investor cash are grabbing homes in all directions and many, if not all, of them are paying in cash. This comes from the sudden interest in the depressed area of Nevada. The state has been plagued with a surfeit of foreclosures since the last housing collapse. And now with more and more investors bidding on said properties, the state is facing a housing purchase blitzkrieg.

Investment firms are being led by Colony Capital, American Homes 4 Rent and Blackstone Group. These firms have started buying homes around eight months ago, adding as much as 55,000 single-family homes to their portfolio. In Vegas alone, an increase of 10 percent in the number of homes sold was experienced.

This frenzy is causing quite a stir as home construction permits in the area has surged to 50 percent. Yet even with the number of homes being bought left and right, investors are now finding themselves hard up for contractors available to turn their easy earned investments into cash machines.

Many experts are worried that this trend of quasi-uptick in the housing market may cause another collapse. Some are even seeing a mini-bubble being formed. The main problem with this, according to experts, is the lack of strong economic foundation. The recent deluge of investors buying up properties may see a way to increase their bottom line. But without sturdy employment rates and public spending to back things up, the market might be seeing another collapse. To wit, Vegas is currently suffering from 10 percent jobless rate, approximately two points more than the national average.

The 30 to 40 discount one can get from these homes in late 2011, as well as cheap financing and dollars from the deep pockets of investors, prompted this sudden outpour of demand. Annual returns ranged from 14 to 27 percent. And with millions of Americans just rising from the ashes of the housing market ruin, the only option might as well be renting. However, it is still not the case that many are clamoring for rental homes and many investors now doubt the prospect returns from their investments.

The increase in home valuation for depressed housing markets may seem a good source of fortune. But experts beg to differ as the law of demand will soon put a stop to the music. The growth in the residential real estate is not much of a growth as it is a potential threat for another bubble. It will only be a matter of time before everyone felt the effect of this current trend in the housing market.

Selda Kirkan
phone: +1.954.3056424