Newspaper article International New York Times

Rethinking Homes and Their City Role

Newspaper article International New York Times

Rethinking Homes and Their City Role

Article excerpt

Investors' binge in home purchases is fueling anger in American cities.

Remember when big investors claimed to be on the American homeowner's side? By funding securities derived from diced-up mortgages, they argued, they pumped money into the markets and financed dreams. Well, that went well. Now, as the housing market recovers from the crisis they helped to cause, some of these investors are back in the game -- except this time, they're not financing home buyers. They are bidding against them.

From coast to coast, private equity firms, hedge funds and other institutional investors are snapping up houses -- the kind that people actually live in, as opposed to swaps of bundles of slivers of mortgages. A broker in Brooklyn estimated not long ago that 70 percent of local home purchases were by such investors. In a research note last week, Bank of America Merrill Lynch warned that while "home prices have surged," a "historically low" share of sales were to first-time buyers.

"The decline in first-time buying has been offset by an increase in demand by investors, including large private equity firms," the bank said. "The concern is that demand from investors will fade this year but first-time home buyers won't be prepared to take back market share as a result of tight credit and years of sluggish income growth."

From a buyer's point of view, the economic history of the last decade reads a lot like this: First Wall Street tried to sell me loans I couldn't afford. Then it refused to lend me money for what I could afford. Now it is bidding against me.

The investors' binge is fueling anger in American cities. On the website Free Williamsburg, commenters recently bandied about ideas for keeping investors out of Brooklyn, one of the five boroughs of New York City. We could tax them, one suggested. Another proposed tagging investor-owned buildings to "let people know with graffiti and stamps who owns the place." And there was this, from a user called Rivegauch610: "I would like to see the same fate befall repulsive beings like these as happened to the wealthy in Russia, ca. 1918."

The fear has to do partly with rising prices, and partly with the loss of character in what were once stable neighborhoods of family- owned homes. …

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