Posted by Leonard Steinberg on June 4th, 2013

Did large Wall Street firms save the crashed housing markets in the USA with PRIVATE STIMULUS? Some would say yes. Large investment firms have spent billions of dollars throughout 2012 buying homes in some of the nation’s most depressed markets. The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. In a market driven by lower inventories, the purchase of these large swaths of houses has had a marked effect in some cities that at one point had dramatic over-supply. Now many of these same areas are beginning to experience bidding wars as buyers options dwindle. Some are already wondering if prices will slump anew if the big money stops flowing. Firms like Blackstone (bought over 26,000 homes) and Colony Capital (over 10,000 homes) have bought large chunks of inventory at bargain pricing, are currently renting those properties, and then plan to sell them once the markets are recovered in a form of privatized STIMULUS funding. The returns should be spectacular. The question I ask is: should the government have done this earlier to help prevent the markets collapsing, wiping out billions of dollars of net worth, tax income, millions of jobs, etc. Probably not: Wall Street would have considered this heinous, possibly socialism. The question I ask is how much was lost waiting this long for the Wall Street vultures to swoop in and buy this inventory at bargain-rate, pennies-on-the-dollar pricing?

Overall I think this vast purchasing spree has benefitted the confidence levels in the housing market, boosted building activity, job creation and the markets (and economy)in general. Every job created takes someone off the government payroll and adds tax revenue and a healthier (spending) consumer to the economy. How these Wall Streeters handle the unloading of these properties could impact the market in general too. Wall Street has certainly not been behind the purchase of most inventory in the New York markets, although many stalled projects were rescued over the past 4 years. Sadly it appears a big chunk of US consumers are now paying a monthly rent check instead of a monthly mortgage payment towards ownership in this super-low interest rates market, making Wall Street the beneficiary on two levels: cheap money and cheap property.