If there is any market that demonstrates the complete and total misallocation of capital that results from Banana Ben Bernanke’s money printing and artificially low interest rate policy, it the latest phony American housing bubble. With a record numbers of citizens on the food stamp electronic breadline, with unemployment stubbornly high no matter what data you use, billionaire financial oligarchs are running around bidding up “homes for rent” and pricing out the random average person that actually has the capacity or desire to bid. I just read an excellent article that demonstrates the degree of insanity that has now been unleashed upon the streets of Las Vegas.
As the title of the post mentions, a study from the University of Nevada at Las Vegas show some 40,000 homes are vacant, or 8% of the metropolitan area’s single-family housing stock. So it would seem that this would provide plenty of good deals for investors right? Certainly there doesn’t seem to be a need for new home construction. Well think again! In their QE-forever induced delirium, homebuilders have gone Chinese and in Las Vegas “permits for new home construction are up 50 percent, twice the national average.”
My favorite line in the entire article comes at the end when a prospective buyer explains what happens when an actual citizen attempts to purchase a home to actually live in:
“We know there is a minute chance we get anything,” she says. “The most frustrating part of all this is how home prices keep going up and up, yet you have so many empty homes.”
Oh and it seems Oaktree has followed Och Ziff’s lead and pulled back from the “buy to rent” insanity. Soon all that will be left are the dumb money and homebuilders, who should start thinking about what kind of bailout they will lobby for when this entire thing unravels. From Reuters:
These big investors and a handful of others have bought at least 55,000 single-family homes across the U.S. in the past year. In the Vegas area alone, they have accounted for at least 10 percent of the homes sold since January 2012, according to a Reuters analysis of housing transactions.
That added firepower helps explain why home prices in this metropolitan area of 2 million people are up 30 percent over a year ago, far more than the national average of 10 percent. Permits for new home construction are up 50 percent, twice the national average.
Las Vegas would seem a highly unlikely locale for a new housing bubble. There are at least 20,000 homes in some stage of foreclosure, and the jobless rate hovers near 10 percent, some two points above the U.S. average. A healthy housing market depends on people having good-paying jobs so they can accumulate down payments and finance their mortgages.
Healthy markets? That’s so last century!
Cracks are showing in Vegas and beyond. Here, rents on single-family homes were down an average of 1.9 percent in March from a year ago. In other regions targeted by institutional buyers, such as Phoenix, Southern California, Atlanta and Florida, rents are either falling or flat, according to online real estate service Trulia.
Industry insiders estimate that roughly half of the more than 55,000 homes acquired by institutions over the past year in the U.S. have yet to be rented.
In Oceania, that is a market signal for build more homes.