RE: Your Tax Dollars at Work

[don]

wonder where that free money is going . . .

By John Gittelsohn - Mar 13, 2013

Blackstone Group LP (BX), manager of the largest real estate private-equity fund, has expanded a credit line to buy single-family homes to $2.1 billion from $600 million, according to a person with knowledge of the deal.

Deutsche Bank AG (DBK) leads the syndicate of banks, said the person, who asked not to be named because the loan is private. Other lenders include Bank of America Corp., Credit Suisse Group AG (CSGN), Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM)

“The deal demonstrates that the market for these types of loans is expanding and maturing as major Wall Street banks become more and more comfortable with the asset class,” Stephen Blevit, an attorney for Sidley Austin LLP who represented Deutsche Bank, said in an e-mail from Los Angeles.

Blackstone has invested $3.5 billion to buy 20,000 single- family rental homes since last year, making the New York-based company the largest investor of its type in the U.S. The firm is rushing to acquire properties as housing prices recover and as demand for rentals increases among people who can’t qualify for a mortgage or don’t want to own.

Blackstone spokesman Peter Rose and Deutsche Bank spokeswoman Renee Calabro declined to comment. The firm had been trying to increase the loan to $1.2 billion.

The single-family home rental business, which has been dominated by small investors, is attracting more institutional capital. American Homes 4 Rent, a Malibu, California-based company headed by Public Storage (PSA) founder B. Wayne Hughes, has acquired about 10,000 properties. Thomas Barrack’s Colony Capital LLC has raised $2.2 billion for home purchases.

Public Offerings

Silver Bay Realty Trust Corp. (SBY), a Minnetonka, Minnesota- based real estate investment trust, raised $263 million in an initial public offering in December. American Homes 4 Rent issued a statement last month saying it plans to file for an IPO within 60 days.

“The next milestone to come is the securitization of single-family residential rental homes, which we expect will occur in the second half of 2013,” Blevit said, referring to bonds that bundle pools of loans and slice them into securities of varying risk. Charles Schrank and Anny Huang, Sidley Austin attorneys from Chicago, worked with Blevit on the deal.

U.S. home prices rose 6.8 percent last year, the biggest 12-month gain since July 2006, according to the S&P/Case-Shiller index of property values in 20 cities.

More than 5 million former owners have lost their properties to foreclosure or in a distressed sale since home prices peaked in 2006, according to RealtyTrac. Last year, the total number of renter-occupied residences increased 1.1 million, while the number of owner-occupied households fell by 106,000, according to a Commerce Department report.

To contact the reporter on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net
To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

[don]

Re: Your Tax Dollars at Work

it's becoming increasingly obvious that this investment "of a new type" is simply another speculative investment. Blackstone isn't planning on being a long-term landlord. When the time is deemed right, these will be dumped like any other speculation . . .


Global housing bubbles unite: How easy debt has created the first ever worldwide housing boom and bust. The busted, the leveled, and the booming.

Economic history is a fascinating subject. Yet in our modern day of instant news and second to second market analysis, it seems like the media is bent on skimming over on only what is going on at the moment. Even the deepest financial crisis since the Great Depression is now gone into the vortex of cultural amnesia. What is interesting however, is that many countries around the world being incredibly different culturally, went down into the rabbit hole of housing mania as well. If you ever think Southern California home prices are outrageous, you need only look at Northern California. If you live in the Bay Area, all you need to do is look at Canada. There has never been, from all the history I’ve reviewed, of a universal and unified housing bubble that touched nearly every continent at the same time at such a big magnitude. Let us take a trip around the world and see what other housing markets are doing.

Those in bust mode

Two countries with giant housing bubbles that are still in the bust phase are Ireland and Spain:



Home values in Spain are now down by 27 percent from their peak while in Ireland, housing values are down a stunning 55 percent. It looks like prices in Ireland might be hitting a bottom but in Spain, given that over half of their young are out of work, it might be hard to see this picking up anytime soon at least from domestic demand. Easy money, fast building, and inflated prices.

These are a couple of markets that are still deep in the doldrums. It is hard to see these turning around anytime soon but if they do, the Irish housing market is likely to come back first simply because it has fallen so dramatically and popped a couple of years before that of Spain making prices much more affordable to those living in the country.

Those leveling out and turning around

Believe it or not, the US overall has hit a trough:



US home values are now down about 29 percent from their peak and are up over 5 percent year-over-year. As we mentioned many times, in the vast majority of states purchasing a home in the US isn’t a bad move. Given the giant subsidies in mortgage interest deductions (not always utilized fully), cheap rates, and the ability to build equity it is a wise move if purchasing at a right price. This applied to a generation before us and applies to the market today. However, in some hot markets like in Southern California the typical buyer simply cannot compete with the all cash buying from investors. Someone in the industry mentioned to me that those that buy with FHA insured loans are taking the crumbs of what the investors don’t want which are typically not the best places. The deals are rarely going to the typical family looking to buy.

Yet this is not the case for the US overall. Housing markets in many places are very reasonable and ironically, many of those states are the states with little to no investor activity. California has had about 30 percent of all purchases being made by investors in the last few years (versus a rate around 10 percent or less being the case for more stable markets).
The above chart of the 20 City Case Shiller Index is a reflection of the aggregate, not regional areas that may exhibit more bubbly behavior (i.e., over bidding, emotional pleas to sellers, all cash buying, and high flipping rates).

The booming

Canada is one of those housing markets that simply keeps going up, although it is starting to show massive signs of frothiness. Any time I bring this up, I get a good amount of comments on how “it is different” up there (or how we are different down there). In the US, even prime areas took a hit and the overall US market is still down about 30 percent from the peak. Zero correction has hit Canada and a big part of their economy now relies on housing:



At the peak of our insane housing market, residential investment as part of GDP made up about 6 percent for our market. In Canada, it is now inching closer to 7 percent. The historical average in Canada has also been higher. But what about homes already built pushing prices up? We’re not the only people seeing this:

“(Canada) A severe economic shock, such as the kind that hit Japan in the early 1990s and California and Nevada in 2006, would have to knock Canadian housing prices down by 44% to cause securities linked to Canadian mortgages to lose the highest ratings assigned by Moody’s Investors Service.

Such a house price decline, were it to happen, would be driven primarily by the phenomenal upswing in Canadian home prices over the past decade, Moody’s said.

Canada joins Spain, as well as the United Kingdom and Australia, in the ratings agency’s assessment of countries where growth in housing prices over the past 10 years has driven their values away from sustainable market fundamentals and into “overheated” territory.”

Like the Endless Summer sagas, you can technically go around the world and chase housing bubbles into perpetuity!

[lektrode]

Re: Your Tax Dollars at Work

it's becoming increasingly obvious that this investment "of a new type" is simply another speculative investment. Blackstone isn't planning on being a long-term landlord. When the time is deemed right, these will be dumped like any other speculation . . ...
....
........
At the peak of our insane housing market, residential investment as part of GDP made up about 6 percent for our market. In Canada, it is now inching closer to 7 percent. The historical average in Canada has also been higher. But what about homes already built pushing prices up? We’re not the only people seeing this:

“(Canada) A severe economic shock, such as the kind that hit Japan in the early 1990s and California and Nevada in 2006, would have to knock Canadian housing prices down by 44% to cause securities linked to Canadian mortgages to lose the highest ratings assigned by Moody’s Investors Service.

Such a house price decline, were it to happen, would be driven primarily by the phenomenal upswing in Canadian home prices over the past decade, Moody’s said.

Canada joins Spain, as well as the United Kingdom and Australia, in the ratings agency’s assessment of countries where growth in housing prices over the past 10 years has driven their values away from sustainable market fundamentals and into “overheated” territory.”

Like the Endless Summer sagas, you can technically go around the world and chase housing bubbles into perpetuity!

kinda makes ya wonder why one even bothers anymore, ya know - actually WORKING FOR A LIVING ???

[Fox]

Re: Your Tax Dollars at Work

The booming

Canada is one of those housing markets that simply keeps going up, although it is starting to show massive signs of frothiness. Any time I bring this up, I get a good amount of comments on how “it is different” up there (or how we are different down there). In the US, even prime areas took a hit and the overall US market is still down about 30 percent from the peak. Zero correction has hit Canada and a big part of their economy now relies on housing:

I'll just add some fuel to the flames.

It is actually "different" up here and this time. We have come out of this finacial crisis with a "Safe Haven" label and money is pouring in to Canada from the rest of the world's QE projects. Wealth Europeans and Asians; as well as Americans; are shifting assets to Canada. And being a Resource based economy, inflated commodities is also bring money in as well.

I don't see what is happening in Canada as a bubble as much as it is an "Equalizing" with the G7. Remember, "G7" was changed to "G8" to keep Canada in the club. Our housing has long been below American, European, and Asian prices. All the talk about bubbles focuses on the rate of change. This does matter, however actual price matters as well.

Here's an interesting graphic for it
(hmm, inserting the image is fighting me)

We are in the process of a deflating housing market now, thanks to Mark Carney's parting kick in Canada's economic teeth. However once this affects GDP the new Bank Governor has many bullets left to prop up prices. And thanks to our whimpy political parties, the bullets will be fired sooner than later.

Now I'm not saying we don't have problems. We do. But unless something major happens within Canada to make us less appealing to the world, our economy will float ever higher on the rest of the world's printed money.

Which I will gladly take and convert in to fixed assets and run.