Wall Street Leads New Global Real Estate Trend?
Traditionally, a property auction is your chance to bid for a single house. However, this appears to be changing. After 2008 economic crisis in the US, hundreds of thousands were losing their homes.
The housing prices were constantly dropping. The people living there became more cautious with purchasing thanks to the crisis aftermath. It was getting harder than ever to get a mortgage.
The US government had to react fast in order to avoid terrible economic consequences - in 2012 they launched a project enabling private investors to purchase resident homes. This was a way for Wall Street to help out in solving the big price-falling problem.
The trick
Although the economic crisis has been successfully avoided, it came with a different price. Wall Street had their hands free to go overboard. And that's exactly what they did.
Major corporations like JP Morgan and BlackRock spent more than 60 million dollars to buy whole neighbourhoods of private housing, outbidding the average price by 20-50%. This made it nearly impossible for regular people to win these auctions. The problem is that the housing prices are recovering, but there are less and less homeowners.
The Atlantic reported that over the course of 6 years (2011-2017), 200 000 homes were bought by these organisations for more than $36 million. Now that figure passed the mark of $60 million.
Wall Street saw this as an opportunity to rent these homes directly to single families. This trend goes beyond borders, as investment funds from Qatar also showed interest in renting family housing.
Why Is This Happening?
The global interest rate is low, so investors are looking for higher deals. Inflation causes the currency to fluctuate, and steel and wood prices are rocketing. All these factors led to the big players in the real estate market investing in family housing ownership.
These new corporate landlords own up to a 20% of some suburbial areas in the US, and it is expected that this trend will have an upward trajectory in the future.
How will this trend affect the housing market? Are there any risks coming along with it? These are just some questions that are self-imposed. Time will tell if this is a short-lived trend or a new normal in the real estate market.
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