The housing bust has pretty much shot its load for the meantime, will there be another round of foreclosures moving forward? It is quite possible but nothing like what happened previously. In fact much of the buyers have been foreign with cash continually making America a rental society. So many Americans have been so traumatized by the previous housing bust and now the ending of the middle class in much of the U.S. that they really don’t want to own a house again. They would rather be free in a rental market.
The housing market is a robust sellers market now
The days of ridiculously low pricing and massive foreclosures are over, pricing is back to the normal or above rates, especially now due to far less inventory after the massive property buying from hedge funds. I can remember a friend of mine that is a real estate investor tell me that he couldn’t even touch the online auctions that the hedge funds were paying whatever it took to own the majority of foreclosures that went on the auction block. They bought so many of them that nobody really understood why. I previously wrote an article saying that they will hold out until the massive foreign buying takes place and 200k homes are at a half million and up, just like Vancouver now.
If foreign buyers came in that strong and these hedge funds held out for the long haul to make 500 percent profit on these homes, they will have made a killing. Or could it be they are holding out to become massive landlords moving forward which will also be profitable. It could be they are holding out for BRICS to become a reality and that money may be coming in to buy property. So either way there is a killing to be made in properties moving forward.
The rental market is also becoming robust
The increasing populations in urban areas has been substantial which in effect is making rental prices go much higher despite lower income and job opportunities. We feel that the job market may cause a problem with rentals moving forward unlike real estate holdings for market spikes from foreign interest. We have talked about why we think that mortgage companies are in fact doomed moving forward as well, just look at any other third world market. Rental prices have been steadily increasing at a minimum rate of 10% over the last 3 years in some cities which is good news for landlords.
What do the hedge funds know that we don’t
Besides multi million dollar data mining software and employees that get paid to predict the future, in such a robust market with profits to be made from either renting or selling at this point, the hedge funds do neither. They are holding but for what? What do they know that we do not know that is coming?
- Could they be waiting to get through the cycle of war? Besides a future spike, there seems to be no reason for them to wait for this cycle to get through. Except if they are not done buying, perhaps they are banking on an economy collapse due to the possible impending war, therefore leaving hundreds of thousands more homes up for foreclosure which would be the last wave they would buy to hold until selling later.
- Could they be waiting for inventory to dry up completely? This actually makes sense as a near market dry up with people staying in their current homes, banks no longer writing loans creating a totally dry market. Similar to that of the used car industry.
- Perhaps they are waiting on the impending currency standard changes like the coming BRICS which are with foreigners that currently buy up lots of housing in America.
- Perhaps they are just slow moving making a long term plan on the properties. This is doubtful but it might be that have not yet decided what to do with all the real estate and they figure values will at least give them 10-20% annual increases.
An article that MSN money wrote in 2013 states the following;
Beware of a flood of inventory as a result, and beware of larger than expected price declines in real estate in the year ahead. Real estate and real estate stocks are likely to come under severe pressure.
While many people in the real estate business have predicted the same flooding, we feel they are wrong. We do not think there will be a flood inventory and that they will continue buying. Our take is that this will go on until real estate in America turns to be like that of any other developing country in the world, extremely high priced. Take New York City for example over the last 6 or 7 years. According to an article in the New York Daily News earlier this year, the writer gets into the certain area all cash spikes going on with Manhattan bringing in most of it. Foreign cash may not be as interested in a property in the Bronx as it is in uptown.