Blackstone Steps Up Home Buying as Prices Jump: Mortgages

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http://www.bloomberg.com/news/2013-01-09/blackstone-steps-up-home-buying-as-prices-jump-mortgages.html

Blackstone Group LP (BX), the largest U.S. private real estate owner, accelerated purchases of single- family homes as prices jumped faster than it anticipated.

Blackstone has spent more than more than $2.5 billion on 16,000 homes to manage as rentals, deploying capital from the $13.3 billion fund it raised last year, said Jonathan Gray, global head of real estate for the world’s largest private equity firm. That’s up from $1 billion of homes owned in October, when Blackstone Chairman Stephen Schwarzman said the company was spending $100 million a week on houses.

“The market is moving much faster than anybody thought possible,” Gray said during an interview in Blackstone’s New York headquarters. “Housing is much stronger than people anticipated.”

Blackstone is the largest investor in single-family homes to manage as rentals, acquiring properties in nine cities, from Miami to Phoenix, where prices surged 22 percent in the 12 months through October. The firm, along with Thomas Barrack’s Colony Capital LLC and Two Harbors Investment Corp. (SBY), is seeking to transform a market dominated by small investors into a new institutional asset class that JPMorgan Chase & Co. (JPM) estimates could be worth as much as $1.5 trillion.

[dixiegrrrrl]

1. And so the pattern is revealed.

Steal the homes from owners thru mortgage/forclosure fraud, then sell them to wealthy investors for rentals.

No doubt indeed that this will raise home prices.

[KoKo]

2. "The Mysterious New Housing Bubble": "Housing Up, Home Ownership Down"/Mike Whitney

Housing Up, Home Ownership Down
The Mysterious New Housing Bubble
by MIKE WHITNEY

The rebound in housing is now in full swing. Housing starts are up, existing home sales are gaining pace, inventory is down, and prices are on the rise. According to a recent report by Corelogic “House prices are up 6.3% year-over-year in October, the largest increase since 2006 and the eighth consecutive increase in home prices nationally on a year-over-year basis.” Many experts are now predicting that 2013 will be even better, in fact, J.P. Morgan thinks that prices could gain another 10 percent in the next 12 months. Here’s the story from the Wall Street Journal:

“J.P. Morgan Chase Co. expects U.S. home prices to rise 3.4% in its base-case estimate and up to 9.7% in its most bullish scenario of economic growth. Standard and Poor’s, which rates private-issue mortgage bonds, on Friday said it expects a 5% rise in 2013.” (“Home Prices Could Jump 9.7% in 2013, J.P. Morgan Says”, Wall Street Journal)

And the housing boom is having an impact on Wall Street, too, where prescient investors who loaded up on mortgage-backed securities (MBS) are cashing in bigtime via the Fed’s new MBS-buying program dubbed QE3. Fed chairman Ben Bernanke is paying top-dollar for financial derivatives that, in real terms, are probably worth just pennies on the dollar.

Despite the increasingly positive signs of market strength, there are reasons to be skeptical, after all, this is the second time that prices and sales rallied since the bottom fell out in 2006. The first rebound took place in 2009, when President Barack Obama initiated his Firsttime Homebuyer program which provided lavish incentives for potential buyers to sign on the bottom line. The program sparked a frenzy of activity that reversed the direction of the market, but quickly petered out in a matter of months. Could today’s sudden surge in prices be another “false start” or is it the real deal? Only time will tell. But it’s worth noting that the market has never really cleared and that normal supply-demand dynamics have never been allowed to work as one would expect in a free market. In fact, housing is arguably the most maligned and manipulated market of all time. Mortgage rates are artificially low due to Fed intervention (QE3). Inventory is artificially low due to the banks withholding of distressed backlog. Down payments are so minuscule (FHA=3.5%) that homebuyers end up leveraged at a 30 to 1 ratio, the same as the big Wall Street investment banks prior to the Crash of ’08. And, finally, government-backed mortgage modifications (HAMP) provide generous refinancing to high-risk “underwater” applicants with LTV at 125%, a process that makes subprime mortgages look like a model of prudent lending. So much is fake about today’s housing market, that it’s a stretch to call it a market at all.

http://www.counterpunch.org/2012/12/18/the-mysterious-new-housing-bubble/

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3. +1