Why Are Hedge Funds Buying All the Real Estate in CA?
What does it mean for the wholesalers, fixer-uppers and buy & hold investors?
Not only are the hedge funds buying CA real estate, but also the foreign investors, particularly, the Chinese, are gobbling up all the SRFs they can get their hands on. Money is no object and neither is the negative cash flow. It appears they know something we don’t or is it possible they are making a mistake? Or, could this be another scheme to make billions of dollars at the expense of the middle class by manipulating the market, much like what happened in 2008?
http://samsrealestateclub.com/why-are-hedge-funds-buying-all-the-real-estate-in-ca
The South Florida bubble is now officially reinflated. The Florida Association of Realtors reports that during the first quarter of 2013, sales of single-family homes in Miami were up 10.3 percent, with prices up 23 percent, compared to the same period in 2012. But the first hint that something strange is going on is the unusual preponderance of cash deals. About 45 percent of the single-family home sales and 77 percent of condo sales were made in all cash.
As highlighted by a recent story in the Washington Post, a major factor behind both the cash deals and the boom in general is the growing presence of institutional investors. Generally loathe to load up on a volatile, illiquid and generally low-margin asset class like residential real estate, hedge funds and other big money investors have seen lots of opportunity in the wreckage of the sand state housing busts. Analysts told the Post that institutional investors now account for as much as 70 percent of sales in some Florida markets.
http://www.insurancejournal.com/blogs/right-street/2013/06/13/295481.htm
“The airwaves are full of stories of economic recovery. One trumpeted recently has been the rapid recovery in housing, at least as measured in prices.
The problem is, a good portion of the rebound in house prices in many markets has less to do with renewed optimism, new jobs, and rising wages, and more to do with big money investors fueled by the ultra-cheap money policies of the Fed.”
That's nearly identical to the rate at which L.A. properties were going up around 2006 when my daughter bought a condo there. That rate continued for two years at which time I noticed a lot of people talking down the real estate market.
My daughter was fortunate enough to sell at the peak but it was a real squeaker. The first potential buyer met her price but the deal fell through. The second got a ten grand discount and closed the deal.
If properties are already inflating at what was the peak rate during the prior boom, I would be extremely wary.