As the housing market slowly improves, some banks are buying huge tracts of foreclosed houses and renting them in hope of selling later. The practice, backed by Fannie Mae, has created a false market and spiked prices beyond that of many individual buyers.
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Housing investors buy in bulk, aim to profit in hard-hit areas
Investors say they’re providing nice homes for families by buying up bargains, holding them and renting them out. Critics say they’re taking advantage of a situation they caused.
By Alejandro Lazo Los Angeles Times March 16, 2013
Invitation Homes bought one of its first fixer-uppers in the San Fernando Valley just last May, a three-bedroom steps from a sought-after school in north Granada Hills.
More than 200 homes later, the company’s Dodger Blue “for rent” signs are a fixture in the Valley — markers for a massive Wall Street wager on the housing recovery.
Created last year by private equity titan Blackstone Group, Invitation Homes has spent about $3.5 billion buying 20,000 houses in nine U.S. markets, including Southern California. It’s a new business model emerging from the misery of the mortgage meltdown.
Blackstone and a handful of other firms believe prices fell too far in the hardest-hit markets. So they’re racing to buy up the bargains, rent them for short-term profit and hold them for long-term price appreciation. These firms say they’ve invented a new investment strategy that also serves the public good by fueling the housing recovery and sprucing up homes.
The company is creating jobs and providing quality homes for families, said Mark Beisswanger, Invitation Homes chief operating officer.
“We feel good about being able to fix up what is generally one of the worst houses on the street,” he said.
But some experts challenge the business model, and critics call it profiteering at the expense of neighborhoods and families who want to buy the same affordable homes. John Husing, an economist who studies the Inland Empire, notes the irony in Wall Street buying up Main Street.
“They create the problem — and now they are taking advantage of the problem,” Husing said.
In all, major investors have raised between $6 billion and $9 billion to buy single-family homes, according to a recent analysis by investment bank Keefe, Bruyette & Woods. The goal is to bring corporate scale and efficiency to what has historically been a mom-and-pop, single-family-home rental business.
Housing starts rise, permits at four-and-half year high
Reuters March 19, 2013
Groundbreaking to build homes rose in February and new permits for construction climbed to the highest level since 2008, a sign the nation’s housing market recovery is gathering steam.
The Commerce Department said on Tuesday that starts at building sites for homes rose 0.8 percent last month to a 917,000-unit annual rate. That was in line with analysts’ expectations of a 915,000-unit rate.
Starts for single-family units, which comprised about two thirds of the total, edged up 0.5 percent to their highest level since June 2008.
Permits for future home construction rose to a 946,000-unit rate, also the quickest since June 2008.
The housing market has regained some footing after a historic collapse that helped push the economy into a deep recession.
Wells Fargo CEO is highest-paid banker at $22.87 million
Wells CEO John G. Stumpf’s 2012 pay package was up 15% from 2011. Goldman Sachs Group’s Lloyd C. Blankfein made $21 million, and BofA’s Brian Moynihan received $12.1 million.
By E. Scott Reckard Los Angeles Times March 14, 2013
John G. Stumpf, chief executive of Wells Fargo & Co., made more than any banker in America last year — $22.87 million.
Stumpf’s pay package, disclosed Thursday, was up 15% from 2011, an increase Wells said reflected the San Francisco-based bank’s strong performance. Wells earned $18.9 billion, up 19% from 2011, during a year in which big banks collectively turned in near-record profits.
The runner-up at $21 million — a 75% increase — was Lloyd C. Blankfein, CEO of New York’s Goldman Sachs Group, whose pay has been notably lofty over the years. In 2007, Blankfein’s bonus alone was $67.9 million, an example of what critics called extravagant rewards for short-sighted risk-taking — a practice that helped cause the financial crisis.
“If you get it all at once, you don’t really care what happens down the line,” said Paul Hodgson, an independent governance analyst. He said U.S. bank pay practices have improved since the crisis, but only slightly.
Driven into Poverty: Walkable urbanism and the suburbanization of poverty
By David Moser Citytank March 8, 2013
American suburbs are a particularly bad place to be poor. Though poverty poses dire and unjust challenges no matter where it exists, sprawling and auto-dependent land use patterns can exacerbate these difficulties. And this problem is gaining urgency, as more and more of America’s low-income individuals now live in suburbs (or are being pushed there), a phenomenon the Brookings Institute has called “the suburbanization of poverty”.
There are many reasons suburbs make the experience of poverty worse, but first among them is that automobiles are really expensive. Purchasing, maintaining, repairing, insuring, and fueling a car can easily consume 50% or more of a limited income. For someone struggling to work themselves out of poverty, these expenses can wreck havoc on even the most diligent efforts to maintain a monthly budget. With gas now approaching or exceeding $4.00/gallon, a full day’s work at minimum wage sometimes won’t pay for a single tank of gas. The burdens of sprawl weigh heaviest on the poor.
Health Problems Compound For Aging Homeless
By Pam Fessler NPR March 13, 2013
Tony Lithgow and Andrea Mayer have been living under a highway overpass in downtown Baltimore since last year. He’s 49 and has been homeless on and off for eight years. She’s 51 and has been homeless for 10 years.
Living on the streets has clearly taken a toll on the couple, both physically and mentally. While they’re standing at a corner waiting for a free city bus to take them to a soup kitchen, Tony shouts at a passenger staring at them from a car stopped at the light.
“We’re homeless!” he calls out to the man.
Andrea tries to get him to stop, but Tony is on a roll. His anger is palpable.
“You’re one paycheck away,” he says. “That’s all they are. And they don’t understand. That’s all it was for us.”
A growing number of the nation’s homeless are reaching what’s called “premature old age.” Like Tony and Andrea, they’re in their late 40s and 50s, but suffer from ailments more common for those in their 70s. Many will likely die over the next decade. This has posed a challenge for communities trying to care for the homeless and could mean hundreds of millions of dollars in added costs, especially for health care.
In Search of the $100 House
Designers strive to provide super-low-cost dwellings worthy of being called homes.
By Lamar Anderson Architectural Record March 17, 2013
When Román Viñoly, a director at his father’s firm Rafael Viñoly Architects, visited Chile in 2010, he toured an affordable-housing project on the outskirts of Santiago that by all measures should have been a success. It provided clean, structurally sound houses for Chileans who had previously lived in self-constructed slums. The problem? The rows of identical, cookie-cutter units felt more like cellblocks than homes, and their one-size-fits-all approach alienated residents who were used to arranging their dwellings to suit their family structures and living habits. “You saw people vandalizing their own homes, writing graffiti on their own houses,” says Viñoly, who this spring is building a prototype for a low-cost modular house that residents will be able to configure themselves.
Viñoly’s project is part of the latest wave in an effort to design extremely low-cost permanent shelters for people around the globe who lack adequate housing. Inspired by ambitious goals, such as the $100 house proposed by author and social entrepreneur Paul Polak in his 2008 book Out of Poverty, these new designs use different degrees of standardization to push down costs, but they also give homeowners a lead role in determining how their houses will look and function.