|Realities of the New Housing Market;
Institutions Buy and Rent Homes~ by Michael Lombardi, MBA
The most important part of the U.S. housing market—first-time homebuyers—is missing from the action! We need first-time homebuyers in the market to see real growth in the U.S. housing market. After all, they are the ones who buy the fridges, stoves, dishwashers, and other goods that help increase consumer spending in the U.S. economy.Here’s the bottom line on the U.S. housing market and why it’s not really a recovery we can bank on:
In December of 2012, out of all the existing home sales in the U.S. housing market, first-time homebuyers accounted for only 30%! This number was unchanged from November and more than three percent lower compared to December 2011. (Source: National Association of Realtors web site, last accessed January 22, 2013.)
Just look at sales of appliances…
According to the Association of Home Appliances Manufacturers (AHAM), as the housing market “rebounded” in the U.S. economy, the shipments of appliances to stores and warehouses actually declined to 60.7 million units in 2012, compared to 60.8 million units in 2011. (Source: Wall Street Journal, January 15, 2013.) If the housing market is rebounding, why are appliance sales declining?
The Association notes that shipments of six core appliances—washers, dryers, dishwashers, refrigerators, freezers and ovens—declined 2.3% in 2012. For December alone, the shipments dropped 4.1% compared to December of 2011.
To the mainstream media calling this a “recovery” in the U.S. housing market: you’re missing one big point…
Home prices are slowly rising, and supply is slowly decreasing in the U.S. economy, because institutions and individual investors are running to buy residential properties.
For investors, buying up single-family homes enables them to do two things: 1) get a better rate of return on their money, and 2) diversify their portfolios as they shy from conventional stocks and bonds. Let me repeat it again, it’s not the first-time homebuyers who are rushing into the U.S. housing market.
Just as an example…
In a tax auction held in Wayne County, Michigan, one investor purchased 290 properties for $189,600. (Source: Bloomberg, January 16, 2012.) Yes, that’s less than $700.00 per property.
As for institutions, I have already talked about them in this newsletter. Companies like The Blackstone Group L.P. (NYSE/BX) are spending billions of dollars to buy residential properties, betting for higher returns.
So, what I hear in the mainstream media about the rebound in the U.S. housing market isn’t very convincing to me. In reality, we don’t have any real growth in the U.S. housing market—only speculation.