What Housing Recovery: Some September 2015 Housing Facts

September 1, 2015

 

The home ownership rate in the U.S. is at 63.4%, a 40-year low. (source: U.S. Census Bureau)

Blackstone Group, one of the world’s largest private equity firms, is the largest owner of single-family rental homes in the nation. As of March, 2014, Blackstone had acquired 40,000 houses, most of them foreclosures.  Deutsche Bank gave Blackstone a $3.6 billion line of credit to buy houses allowing it to outbid individual local buyers.  Blackstone’s biggest investors include Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, Deutsche Bank and JPMorgan Chase. (source: Laura Gottesdiener, “Wall Street’s Hot New Financial Product: Your Rent Check,” Mother Jones, March/April 2014.)

What do the Blackstone investors have in common?  These are the same banks who were the big warehouse lenders – giving lines of credit to mortgage companies like Ameriquest, American Home, Long Beach and New Century so that these mortgage companies could make adjustable rate subprime mortgages at breakneck speed and offer products including “no verification” loans.  These were also the same banks that made billions by securitizing subprime mortgages and selling the securitized mortgage-backed trusts to pension funds, cities, small banks and insurance companies.  These were also the same banks that pulled the plug on warehouse lending, causing the Financial Crisis of 2008 and causing the mortgage-backed trusts to lose billions.  These were also the same banks that had secured credit default swaps for themselves and engaged in short-selling so that they profited when the subprime mortgage market and the mortgage-backed trusts collapsed.  Now, through Blackstone and other private equity firms, they own more American houses than anyone else. (source: “Wall Street and the Financial Crisis: Anatomy of a Financial Collapse,” U.S. Permanent Subcommittee on Investigations Report, Cosimo Reports, 2011)

BlackRock, Inc., the world’s largest money manager, joined Cerberus Capital Management, Blackstone Group LP and Colony Capital Inc., with plans to loan money to smaller landlords – those who buy 10 or more rental homes – of the 14 million rental homes across the country and bundle the loans into bonds.  The new type of debt makes more money available to single-family home landlords as many Americans choose renting over home ownership. (source: Heather Perlberg, “BlackRock Said to Start Financing Rental-Home Investors,” Bloomberg Business, August 24, 2015)

The median sales price for existing homes peaked in July 2006 at $230,400. It did not reach $230,000 again until June 2015.