Blackstone’s Home Buying Binge Drops 70% from its Peak Last Year

The whole story about how private equity firms and hedge funds have steamrolled into the residential home market to become this decade’s slumlords is a story covered on this blog before mainstream media even knew it was happening. I first identified the trend in January of last year in one of my most popular posts of 2013: America Meet Your New Slumlord: Wall Street.

Since then, I’ve done my best to cover the various twists and turns in this fascinating and disturbing saga. Some of my follow up pieces can be read below:

March 2013: Is the “Buy to Rent” Party Over?
May 2013: Carrington Bails: More Smart Money Leaves the “Buy to Rent” Game
July 2013: The Las Vegas Housing Market has Gone Full Chinese
August 2013: Welcome to the Housing Recovery: Rents are Rising, Incomes are Falling
October 2013: A Closer Look at the Decrepit World of Wall Street Rental Homes
February 2014: Is “Buy to Rent” Dead? – Rents on Blackstone Housing Bonds Plunge 7.6%

With all that in mind, let’s now take a look at the latest article from Bloomberg, which points out that Blackstone’s home purchases have plunged 70% from their peak last year. Perhaps they overestimated the rental cash flow potential of indebted youth living in their parents’ basements?

From Bloomberg:

Blackstone Group LP is slowing its purchases of houses to rent amid soaring prices after a buying binge made it the biggest U.S. single-family home landlord.

Blackstone’s acquisition pace has declined 70 percent from its peak last year, when the private equity firm was spending more than $100 million a week on properties, said Jonathan Gray, global head of real estate for the New York-based firm. After investing $8 billion since April 2012 to buy 43,000 homes in 14 cities, the company has narrowed most of its purchasing to Seattle, Atlanta, Miami, Orlando and Tampa.

President Barack Obama credited the investors for helping put a floor under the plunging housing market and consumer advocates such as the National Community Reinvestment Coalition later blamed them for soaring prices in some cities.

While institutional purchases nationwide fell to a 22-month low in January, corporate investors were more active in the Atlanta region, buying 25 percent of homes sold, according to data firm RealtyTrac. That helped drive up Atlanta prices 37 percent since the March 2012 trough.

Now read this fantastic article from real estate analyst Mark Hanson, who points out that homes are much less affordable now that they were at the peak of the most recent housing bubble.

Never fear serfs, now that homes have once again become unaffordable, the banks are bringing back subrpime loans so that Blackstone can sell back to the muppets.

Ah, crony capitalism at its finest.

Full article here.

In Liberty,
Michael Krieger

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6 thoughts on “Blackstone’s Home Buying Binge Drops 70% from its Peak Last Year”

  1. So in your opinion you would not recommend rental properties at the moment? What indications would you look for before jumping in?

    Much thanks.
    -Brian

    Reply
  2. Quite the choreographed pump and dump. Part of me hopes the music stops before their FED assisted pump and dump on the general population is complete.. I doubt it will..

    Reply
  3. I’m new to your blog, so perhaps you’ve addressed this before, but the institutional and private equity investors objective is not to generate rents, but rather to bundle and securitize all these properties, then sell them off not one by one, but in bulk as securities to pension funds, large foreign investors from all around the world, and big insurance companies. This is their exit strategy.

    Pre-2008 we had the securitization of mortgage backed securities (MBS) bundled and sold. Today we have securitization of rental properties (REO) being bundled in tranches and sold. It’s securitization 2.0 leading to housing bubble 2.0.

    Rating agencies will stamp them AAA. Then government lowers the lending standards, which drives up the qualified buyer pool, which drives up property prices. This is when Blackstone and the big players exit the room en mass, and prices crash. I think we’ve seen this story before.

    – Contrarian

    Reply

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