Housing has become a significant part of the action in the recent, Fed-stimulated economic recovery. The happy talk around the upswing features cheerful notes about increased home values and multiple bids. However, some wise heads are considering whether this so-called recovery is in fact becoming a housing bubble.
According to a story in bloomberg.com, "investors" are fueling the housing market, rather than single-family home owners. These players include deep-pocketed firms such as Blackstone, which purchase foreclosed homes on the cheap and transform them into rentals. The dirty secret in this arrangement is that rents in these homes turn out to be higher than the mortgage payments the homes' former owners could not afford to make.
The Bloomberg article cited a Wells Fargo housing analyst's view of the market. Investors, the expert noted, "are buying properties as quickly as they can and when they leave, housing will take a hit. Investors accounted for 19 percent of sales in the U.S. in March and even more in some former bubble markets, according to the National Association of Realtors." Guess who will take the fall when the next bubble bursts?
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