WALL STREET MAKING IT MORE DIFFICULT TO FIND GOOD DEALS LEX LEVINRAD
Why is it so much more difficult to find
a great deal on a bank owned property
in today’s market? The main reason is
because buyers are faced with a
declining inventory of bank owned
properties on the market. There are
many
reasons
inventory.
for
Firstly
this
declining
the
“shadow
inventory” that we have been hearing
about for the past three years has
never entered the market. If you
Google the word “shadow inventory”
you will see many articles written by
the media depicting the dreaded “shadow inventory” of looming foreclosures that have yet to hit the market.
However, the reality is that this shadow inventory may never ever hit the market. Listings on the Multiple Listing
Service (MLS) have been declining consistently for the past few years. There are not enough single family
homes on the market to meet cash buyer’s demands and there are many more cash buyers than there are good
deals.
The main reason for the substantial decline in available properties is one phenomenon that has changed the
real estate market significantly. That phenomenon is Wall Street. This was bound to happen. As real estate
prices declined from 2007 to 2011, Wall Street started to notice. By 2012, when the market stopped declining,
major Wall Street players like Blackrock Capital entered the market and began purchasing single family homes.
In some areas prices declined so much that rates of return on single family homes were as high as 15 percent.
This was an opportunity that Wall Street was not going to pass up. The opportunity and the high rate of return
enticed Wall Street investors who entered the real estate market in 2012.
Adding fuel to the fire, Warren Buffet, one of the world’s greatest stock market investors said on CNBC in
February 2012 “I would buy up a couple hundred thousand single family homes if I could”. In that same CNBC
interview he also mentioned that “if held for a long period of time and purchased at low rates, houses are even a
better investment than stocks. That is quite a statement from arguably the most famous investor in the world,
and analysts at all of the major Wall Street funds took notice. In December of 2012, Black Rock Capital issued
their own report on the housing market which stated “Home prices are improving, inventory is declining; it’s
reasonable to say U.S housing is starting a recovery”.