Bo’s Clips: Wall Street Buyers

The housing industry’s spike in sales is largely fueled by speculating corporations with idyll bucks to invest. The typical deal is for an underpriced house that is held as rental property until it’s sold for a significant profit. The practice calls into question the “growth” in the housing market and underscores that average homebuyers are being forced out of the market by behemoth banks.

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Behind the Rise in House Prices, Wall Street Buyers

By Nathaniel Popper        New York Times       June 5, 2013

The last time the housing market was this hot in Phoenix and Las Vegas, the buyers pushing up prices were mostly small time. Nowadays, they are big time — Wall Street big.

Large investment firms have spent billions of dollars over the last year buying homes in some of the nation’s most depressed markets. The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. Some are already wondering if prices will slump anew if the big money stops flowing.

“The growth is being propelled by institutional money,” said Suzanne Mistretta, an analyst at Fitch Ratings. “The question is how much the change in prices really reflects market demand, rather than one-off market shifts that may not be around in a couple years.”

Wall Street played a central role in the last housing boom by supplying easy — and, in retrospect, risky — mortgage financing. Now, investment companies like the Blackstone Group have swooped in, buying thousands of houses in the same areas where the financial crisis hit hardest.

Blackstone, which helped define a period of Wall Street hyperwealth, has bought some 26,000 homes in nine states. Colony Capital, a Los Angeles-based investment firm, is spending $250 million each month and already owns 10,000 properties. With little fanfare, these and other financial companies have become significant landlords on Main Street. Most of the firms are renting out the homes, with the possibility of unloading them at a profit when prices rise far enough.

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Rising Prices Make Homeownership Affordability More Unequal Across the U.S.

Asking prices are up 16.3% year-over-year in America’s least affordable metros – far ahead of the overall national increase of 9.5%.

By Jed Kolko         Trulia Trends       June 7, 2013

The Trulia Price Monitor and the Trulia Rent Monitor are the earliest leading indicators of how asking prices and rents are trending nationally and locally. They adjust for the changing mix of listed homes and therefore show what’s really happening to asking prices and rents. Because asking prices lead sales prices by approximately two or more months, the Monitors reveal trends before other price indexes do. With that, here’s the scoop on where prices and rents are headed.

Prices Up 9.5% Year-over-Year, and Rising in 98 of 100 Largest Metros

In May, asking home prices rose 1.1% month-over-month, seasonally adjusted. That’s slower than in previous months — asking prices rose 1.4% in each of February, March, and April (includes revisions) – but still at a very fast clip. Quarter-over-quarter, prices are up 4.0%, seasonally adjusted. Year-over-year, prices are up 9.5% nationally and are higher than one year ago in 98 of the 100 largest metros.

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Why the Feds Agreed to Spend TARP Money on Demolishing Michigan’s Empty Buildings

By Sarah Goodyear        The Atlantic Cities      June 7, 2013

A steady rise in housing prices nationwide has made analysts and investors hopeful about the future of the U.S. housing market overall. But in Michigan, one of the states most battered by the financial downturn, officials are still grappling with the grim remains of years of unemployment, population loss, and plunging property values.

Those remains are not figurative. They can be seen in the form of abandoned houses — tens of thousands of them — in neighborhoods around the state. Detroit alone has more than 30,000 such buildings.

That’s why the Michigan State Housing Development Authority has been seeking permission to use federal funds aimed at keeping people in their homes to instead tear down derelict structures where no one will ever live again, and which often attract drug dealers, prostitutes, or arsonists.

Yesterday, the feds finally agreed. Treasury officials released $100 million in money from the Troubled Asset Recovery Program, or TARP, to pay for a pilot demolition program in five Michigan cities: Detroit, Flint, Grand Rapids, Pontiac, and Saginaw.

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Federal court says highway sponsors must first study transit, impacts on suburban sprawl

By Kaid Benfield       Switchboard       June 7, 2013

It is just an interim ruling, but it is potentially an important one:  In a suit brought by inner-city, minority plaintiffs, the US District Court in Milwaukee has indicated that the Federal Highway Administration (FHWA) and Wisconsin Department of Transportation (WisDOT) cannot enlarge a major urban freeway connection without further study of the project’s impacts on transit-dependent populations and on regional suburban sprawl.  For now, the case is headed to mediation; but the court’s ruling on legal issues in the case, as articulated in an opinion signed by federal judge Lynn Adelman, is potentially significant to other highway-expansion controversies with similar circumstances.

First, the court found that, before going forward with plans for construction, the agencies must first study the impact of “continuing to expand highway capacity in the region while transit capacity declines.”  Second, the agencies also must examine the potential regional effects of highway expansion on suburban sprawl.  The court rejected the agencies’ argument that they need only study the impacts in the specific area where the highway expansion was taking place, finding that it would defeat the “action-forcing” intent of the National Environmental Policy Act (NEPA) if a piecemeal approach to highway projects and analysis allowed cumulative regional impacts to escape scrutiny.

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Austin City Council OKs two plans to track rental properties

By Sarah Coppola      Austin American-Statesman      June 7, 2013

The Austin City Council OK’d two plans early Friday aimed at helping the city track and impose tougher penalties on rental properties that have unsafe or unsanitary conditions.

One plan, crafted by Council Member Bill Spelman, will require rental properties to register with the city and be inspected periodically if they receive two or more “notices of violation” in one year for refusing to follow health and safety codes. That plan passed unanimously.

The other plan, written by Council Member Kathie Tovo, will be a one-year pilot program that will require registration and periodic inspections for all rental properties in three areas thought to have the most problem properties: part of North Austin that includes the Rundberg neighborhood; parts of SoutheastAustin along and near East Riverside Drive and East Oltorf Street; and neighborhoods near the University of Texas.

That plan passed 5-2. Spelman and Mayor Lee Leffingwell voted against it, saying it would apply to too many properties and cost too much to carry out.

Spelman estimated that the city would need 31 new inspectors, at a cost of $2.6 million, to check the properties in the three areas outlined in Tovo’s plan.

Leffingwell said the city should target “repeat offender” properties but said Tovo’s plan “is like looking for a needle in a haystack with a backhoe. It will be massively expensive, and ultimately that cost will be borne by Austin taxpayers and renters.”

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