The housing market is largely effected by what happens from investors. When investors get into the market and purchase homes for renting purposes, the surrounding area’s home prices increase. When investors suspend their purchasing, the prices decrease.
Over the last 3 years, investors have purchased more than 850,000 homes according to a study. Markets that were effected the most from this investor purchasing were Phoenix and Las Vegas. Investors accounted for nearly 50 percent of all home sales resulting in a price increase for home value of 20 percent. But as investors hold off on their purchases, the cost of housing begins to drop. As the record low of housing inventory was reached, coupled by low interest rates, many locations simply do not have an attractive market for investors at this time.
This reversal of direction in housing purchasing by investors is slowly showing its effects into the housing prices. As investors slow their pace and the market inventory is recovering, the increase in housing prices also have lost pace. What is interesting to note is that the cost of rental properties does not seem to fluctuate based on the actions from investors. Housing costs are still up 21 percent from last year, but down 4 percent from the previous month, the first monthly drop since last summer.
There is another cause for concern with investors from Wall Street taking a piece of the housing market. The New York-based Blackstone Group has purchased over 40,000 foreclosed family homes with the intentions of turning them into rental properties. The Magnetar Capital has become Huber Heights, OH primary landlord, owning the largest amount of properties in town and is trying to influence lower tax charges. A change that would weaken the funding for schools and local public services.
These financial institutions role in the real estate market could turn out to be a beneficiary economic development for their company for the sake of the economy for the rest of the country. Rep. Mark Takano (D-CA) thinks Congress has a responsibility to hold hearings and monitor the very new and potentially risky practices of this class of investor-landlords considering the amount of properties Wall Street has been accumulating.