Worldwide Investors Buying USA Property by the Thousands
Typically, landlords tend to be individuals or small firms that own just a handful of homes.
New investors believe the rental income can deliver returns well above those offered by Treasury securities or stock dividends. At the same time, economists say, they could help areas hardest hit by the housing crash reach a bottom of the market.
This year, a property investor signed a $400 million deal with a large unnamed investment company in Silicon Valley. The Investment Company plans to buy 10,000 to 15,000 more homes by the end of next year. Other large private equity investors have committed millions to these new markets, and Lewis Ranieri often called the inventor of the mortgage bond, is considering it too.
In February, the Federal Housing Finance Agency, which oversees government backed mortgage companies, announced that it would sell about 2,500 homes in a pilot program in eight metropolitan areas, including Atlanta, Chicago and Los Angeles.
And Bank of America said in late March that it would begin testing a plan to allow homeowners facing foreclosure the chance to rent back their homes and wipe out their mortgage debt. Eventually, the bank said it could sell the houses to investors.
The big investors are wooed by what they see as a vast opportunity. There is close to 650,000 foreclosed properties sitting on the books of lenders, according to RealtyTrac, a data provider. An additional 710,000 are in the foreclosure process, and according to the Mortgage Bankers Association, about 3.25 million borrowers are delinquent on their loans and in danger of losing their homes.
With so many families displaced from their homes by foreclosure, rental demand is rising. Others who might previously have bought are now unable to qualify for loans. The homeownership rate has dropped from a peak of 69.2 % in 2004 to 66 % at the end of 2011, according to census data.
Economists say that investors could help stabilize home prices. “If you have a lot of foreclosures in one community you will improve everybody’s home values if you take them off the market,” said Diane Swonk, the chief economist at Mesirow Financial. “If those homes are renovated and even rented, it is a lot better than having them stand empty.”