After the housing bubble that occurred in the late 2000, investors, both retail and institutional ones, had been very careful in choosing their next investment. Today, the going trend is that house prices aren’t likely to go up that much and likewise, they aren’t foreseen to drop drastically in the next few years. For now the housing and real estate market is stable.
And it is for these reasons that a growing number of investment firms, private equity partnerships, hedge funds, and real estate investors had been acquiring and accummulating foreclosed single-family homes. One example is the Blackstone Group (BX) who had accummulated more than 2,000 single-family homes worth around $300 million. In fact, investment banks have even picked-up the trend and had been restructuring their financing options to suit the current trend.
Even private equity funds and real estate investment trusts (REIT’s) have shifted their focus from apartments and commercial areas like malls and offices to foreclosed single-family homes. A consulting firm director and UC Berkeley professor has confirmed that more than a dozen investment funds are currently scouting the single-famly homes market, each planning to own up to 10,000 homes across the country. In addition, he is predicting an increase in the number of public REITs dedicated to this type of home over the next few years.
However, Blackstone group and the other funds are not really expecting any spike in price. They are looking into buying these foreclosed homes at a discount, make some repairs, and rent them for profit, in the hopes of being able to sell them eventually when the economy has full recovered and has started to improve. They are willing to wait until those who are renting can finally afford to but their own houses and when the banks have picked-up their lending activities already.