12-09-2012 08:17 PM - edited 12-09-2012 08:21 PM
For all of you who speculated that part of our current inventory shortage was due to instiutional investors buying up big swaths of REOs . . . well, it looks like you were right. Now we know the name, locations and quantities of some of these investors. And at least one of them is planning to go public. Lord help us.
660 S. San Pedro St Los Angeles, Ca 90014
12-10-2012 11:02 AM
I'm not clear that this is a long term strategy, as there is disagreement about this. It seems to be a desperate yield-chasing strategy more than one driven by a recovery in home prices. I also don't fully agree with Corelogic's explanation that prices are vulnerable to a faltering economy, although that is obviously part of it. Prices have been pushed up by a lack of inventory, low interest rates and helped by the selling season. There has also been a host of other supports for prices, which will probably wither away. If interest rates change which will very likely happen mid term, and inventory levels return to normal, then prices could continue to fall in areas which didn't see a full correction, a recovering economy notwithstanding. Granted these areas may not be in the REIT's portfolio target areas, but if prices begin to dip again we'll be back to a bear market psychology again. I personally won't buy into these REITs until there's evidence that the business model works, and that could take a couple of years, by which time it looks like the portfolios may be preparing to liquidate anyway, so will there be a rush to sell holdings? GSE's have also been off-loading foreclosures wholesale at discounted prices to big investors, and Wall Street is sniffing around for anything it can collateralize so the usual suspects are back again. We just need the rating companies to give these SFH investments AAA rating and we're fully back in business. You can be forgiven for sympathizing with Elizabeth Warren's outspoken view that the game is rigged.
12-10-2012 11:23 AM
I agree with almost everything you said but the point I was making is that the bulk purchase investor grab may well explain a (significant?) shortage of inventory. On previous threads many of us feared this would be the outcome. It is my opinion that fear has now turned into fact. How this will ultimately affect prices however is still in the speculation category. Lots of things other than inventory affect housing prices (interest rates, tax policy, unemployment, gov't support, etc.) and we may not be able to measure the "investor efffect" (for lack of a better term) on actual prices until after the fact .
12-10-2012 05:44 PM
Yeah, I know you were. I was just taking the opportunity to expand on other issues raised in the link. I'm not sure it will ever be possible to exptrapolate the effects of the many factors that influence prices, but the drop in inventory tracks the price hike pretty closely and since the fall off was pretty sudden, it's safe to infer the cause wasn't organic.