Oaktree

The Carlyle Group is the Latest “Smart Money” Investor to Ditch the Buy-to-Rent Trade

by

At first, the rise in residential real estate prices across the U.S. was hard to explain. The economy remained in the dumps, while college kids were saddled with debts and poor paying jobs. A large portion of the demographic that typically enters the first home market was simply put, not in the market. Pretty soon it became obvious what was happening. Insider types and “smart money” was simply buying up every property they could find in order to turn around and rent them to the average citizen who had just been priced out of the market due their all cash bids. Add to this tens of billions of dollars in foreign laundered money and voilà, a new housing bubble was born.

However, as more and more lemmings began to chase the trade, initial investors have started to get nervous. First it was Och Ziff, then OakTree, then Carrington and finally now perhaps the most infamous of all insider private equity firms, the Carlyle Group. So now we have four well known and respected investors actively and publicly trying to exit the trade. As usual, they are selling to suckers such as life-insurance companies and real estate investment trusts.

From Bloomberg:

Carlyle Group LP (CG), the private-equity firm with more than a third of its $2.3 billion U.S. real estate fund in apartments, is reducing holdings of multifamily housing as rent growth slows from a post-recession surge.

Apartment-rent growth is slowing as the U.S. homebuying market rebounds and a wave of multifamily building adds to supply. In the third quarter, tenants on average paid 3 percent more than a year earlier after landlord concessions, down from 3.9 percent annual growth in effective rents in 2012, research firm Reis Inc. (REIS) said in a report today.

Read more

Like this post?
Donate bitcoins: 35DBUbbAQHTqbDaAc5mAaN6BqwA2AxuE7G


Follow me on Twitter.

Carrington Bails: More Smart Money Leaves the “Buy to Rent” Game

by

“Buy to rent” has been one of my favorite topics to write about as of late, since the creation of this “asset class,” combined with the total madness that follows from money printing, has once again created a major housing bubble in many markets in these United States.  In recent months, I’ve noted how some of the earliest participants in this market have pulled back.  Most notably Och Ziff, but now Carrington as well.

The signs are everywhere that this market is not only overheated, but downright filled with insanity, and as Carrington’s head Bruce Rose states “stupid money.”  Las Vegas is a prime example of this, where 8% of single family homes are vacant, yet new construction permits are up 50%.  More from Bloomberg:

Hedge fund manager Bruce Rose was among the first investors to coax institutional money into the mom and pop business of single-family home rentals, raising $450 million last year from Oaktree Capital Group LLC. 

Now, with house prices climbing at the fastest pace in seven years and investors swamping the rental market, Rose says it no longer makes sense to be a buyer.

“We just don’t see the returns there that are adequate to incentivize us to continue to invest,” Rose, 55, chief executive officer of Carrington Holding Co. LLC, said in an interview at his Aliso Viejo, California office. “There’s a lot of — bluntly — stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.”

No joke, I actually heard an ad on local Boulder radio that explained how you could “get in” on buy to rent schemes.

Read more

Like this post?
Donate bitcoins: 35DBUbbAQHTqbDaAc5mAaN6BqwA2AxuE7G


Follow me on Twitter.

Las Vegas Housing: 8% of Single Family Homes Vacant, Yet New Construction Permits Up 50%

by

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.

Read more

Like this post?
Donate bitcoins: 35DBUbbAQHTqbDaAc5mAaN6BqwA2AxuE7G


Follow me on Twitter.