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Guest Post: America Meet Your New Slumlord: Wall Street

Tyler Durden's picture




 

Via Michael Krieger of Liberty Blitzkrieg blog,

And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

- Letter from Thomas Jefferson to John Taylor, May 28, 1816

Well they aren’t really your “new” slumlord in the sense you have been debt slaves to the financials system for decades.  What I really mean is that it is now becoming overt and literal.  Literal because financiers are now the main players in the real estate market and are buying all the homes ordinary citizens were kicked out of over the past few years.  Yep, we bailed out the financial system so that financiers with access to cheap credit can buy up all of America’s real estate so that they can then rent it back to you later.

Of course, my opinion is that this will ultimately backfire on all the private equity buyers once they find out multiple generations will start living together and a weak economy will not provide the rental income they envision going forward.  Particularly once we have another severe slowdown…which always happens eventually.  Incredibly, Blackstone has spent $1.5 billion to buy homes in the last 2-3 months alone!

From Bloomberg:

Blackstone has spent more than more than $2.5 billion on 16,000 homes to manage as rentals, deploying capital from the $13.3 billion fund it raised last year, said Jonathan Gray, global head of real estate for the world’s largest private equity firm. That’s up from $1 billion of homes owned in October, when Blackstone Chairman Stephen Schwarzman said the company was spending $100 million a week on houses.

 

“The market is moving much faster than anybody thought possible,” Gray said during an interview in Blackstone’s New York headquarters. “Housing is much stronger than people anticipated.”

Of course the market is improving.  Not because citizens are buying, but because financiers with access to cheap credit are in a bidding war to become America’s slumlords.

The firm, along with Thomas Barrack’s Colony Capital LLC and Two Harbors Investment Corp., is seeking to transform a market dominated by small investors into a new institutional asset class that JPMorgan Chase & Co. estimates could be worth as much as $1.5 trillion.

No more small banks, only mega banks.  No more small real estate investors, only mega real estate investors.  Get the joke?

It’s bought so quickly it’s “warehousing” more than half of the homes it’s acquired as it completes the purchase and hires staff and contractors to renovate and rent the properties, Gray said. It takes about 30 days to fix each home and then as much as 30 days to lease the property, he said.

 

“While leverage is currently limited, potential financing options include secured credit lines, lending syndicates, high- yield debt, government sponsored enterprise-provided financing, and securitization,” Jade Rahmani, an analyst with Keefe, Bruyette & Woods Inc. in New York, wrote in a note yesterday.

 

In the case of the single-family business, Blackstone will rent and manage the homes through Invitation Homes, which it founded last year with Riverstone Residential Group, an apartment management company based in Dallas.

Oh and so next time you go to rent a home or apartment and the leasing company is called “Invitation Homes” don’t be fooled.  It is actually Blackstone; your Wall Street slumlord.

Full article here.

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Wed, 01/09/2013 - 16:47 | 3138076 kaiserhoff
kaiserhoff's picture

Idiots.

Wed, 01/09/2013 - 16:56 | 3138137 nope-1004
nope-1004's picture

Confiscation by design.  First by inflation, then by deflation.  Seems to me someone has already written the handbook.....

 

Wed, 01/09/2013 - 17:04 | 3138178 Freddie
Freddie's picture

Our President is an iranian woman and a former slumlord in Chicago.   Hope & change.

Wed, 01/09/2013 - 17:21 | 3138274 trav777
trav777's picture

this is a dumb@ss article.  The banks who lent the money to buy houses and collected 30 yrs of vig were ALREADY the owners.

And most of the houses are not in SLUMS.

Wed, 01/09/2013 - 18:09 | 3138523 Muppet Pimp
Muppet Pimp's picture

This article is sarcasm to anyone worth their salt, while at the same time red meat for the huffpo crowd.  I see what you did there.  Bravo sir.

Edit: If you take the time to look at the listings, it looks like they fixed them up too.  Many probably sat rotting for a couple years with weeds up to your waist.  Real slum lords, lol.

Wed, 01/09/2013 - 18:46 | 3138655 fourchan
fourchan's picture

this is the system in federal reserve "system".

 

enslave a free nation to debt created from thin air, and capture all assetts through boom bust cycles the "system" creates.

 

it is the definition of evil.

Wed, 01/09/2013 - 17:59 | 3138491 James-Morrison
James-Morrison's picture

Meet the new boss,

Same as the old boss

Wed, 01/09/2013 - 17:50 | 3138442 LeisureSmith
LeisureSmith's picture

One of the more predictable outcomes of this mega clusterfuck....Feudalism coming back in vogue.

Thu, 01/10/2013 - 03:54 | 3139989 13thWarrior
13thWarrior's picture

They already named it, "Neo-medievalism". They are preparing us with medieval computer games and "romanticized historical narrative" aka romantic nationalism.

Wed, 01/09/2013 - 21:14 | 3139194 Buck Johnson
Buck Johnson's picture

The sick thing is that the big boys are the only ones pushing the housing market, and when it collapses again or real soon they will dump this property in order to get their money back.

Wed, 01/09/2013 - 17:10 | 3138171 TruthInSunshine
TruthInSunshine's picture

Mike fails to mention that the other big reason that rents are stable or rising in many areas is because of the GINORMOUS shadow inventory of foreclosed or delinquent properties that have been kept under wraps via the infusion of trillions in excess reserves into the banking sector, and since federal reserve notes are fungible, this has allowed many of the most highly concentrated holders of such properties to just sit on them and do nothing or next-to-nothing (whether they are vacant or occupied), especially since many of the big 6 banks that own so many of these properties (or are servicing their mortgage notes) are too-big-to-fail buddies of Geithner & The Bernank.

This doesn't even get into the millions of homes the GSEs (FREDDIE & FANNIE) are sitting on, as they're propped up by federal reserve notes, also (thanks, taxpayers).

This creates a massively, artificially constrained supply, which creates massive price distortion on rental rates and purchase rates.

When this situation is ultimately "corrected" by the actual market (and do not doubt that this will happen, because you are arguing against a 100% success rate: Mr. Market is batting 100% and central fractional fiat "banks" are batting 0.00% over their careers), it will be monumentally ugly.

Until then, lay back and enjoy the mind rape, Amerika.

Wed, 01/09/2013 - 17:41 | 3138390 kaiserhoff
kaiserhoff's picture

True of the states I know best, and getting worse.  Lots of old folks seem to be locked in, wanting and needing to sell, but way over the market price.  Also, I see endless inventory of commercial stuff sitting and stinking.

Wed, 01/09/2013 - 17:20 | 3138270 Whoa Dammit
Whoa Dammit's picture

Worse than idiots. Full Retard and WTF all rolled into one>>> Industry rumor has it that the houses that are being  "renovated" are not being called in for inspections as required by local building code and are not being CO'd. 

Wed, 01/09/2013 - 19:54 | 3138908 Atlantis Consigliore
Atlantis Consigliore's picture

Godfather III;  Immobliere;  same fleas, different dog

Wed, 01/09/2013 - 23:44 | 3139622 billsykes
billsykes's picture

They know it will collapse, they are in it for the 2% fee per yr.

Guess where that money comes from? Pensions from the broke asses that still have jobs. ha ha.

Wed, 01/09/2013 - 16:49 | 3138086 Rainman
Rainman's picture

LOL....wonder if they looked at Japan's res real estate values...back to 1983 !

http://www.doctorhousingbubble.com/japan-real-estate-bubble-home-prices-back-30-years-zero-percent-mortgage-rates

Wed, 01/09/2013 - 16:50 | 3138099 Sudden Debt
Sudden Debt's picture

it's different because... well... japanese are different.
You see?

Wed, 01/09/2013 - 17:19 | 3138261 NotApplicable
NotApplicable's picture

I laughed at first too. Then I saw the part about their funding sources.

How can one lose when one has no actual exposure to loss?

As always, all losses will be collectivized in the giant liquidity sewer that is the Fed.

Wed, 01/09/2013 - 16:49 | 3138091 Vashta Nerada
Vashta Nerada's picture

I'd rather private equity buy up these homes and rent them than let the federal government turn it into Section 8 'free' housing.

Wed, 01/09/2013 - 17:04 | 3138128 Sudden Debt
Sudden Debt's picture

In Spain, all the locksmiths decided to no longer help the banks to open locks and replace locks on peoples homes who have to be evicted.

When the police noticed it... they said... we'll do that to! Fuck the banks!

And so the banks are in trouble confiscating houses in spain.

Now who are the hero's in this story?

Americans? Or Spanish people?

In America, cops don't have any trouble kicking the living dylights out of you ass because it's their job....

it's pretty hard to find a english article about it but here's one:
http://boingboing.net/2013/01/07/spanish-locksmiths-wont-help.html

Wed, 01/09/2013 - 16:56 | 3138138 Sudden Debt
Sudden Debt's picture

now what do you know, it was on the WSJ also

http://online.wsj.com/article/SB1000142412788732433920457817340122891065...

maybe American cops should grow a pair of balls to?

Wed, 01/09/2013 - 18:14 | 3138562 Eireann go Brach
Eireann go Brach's picture

That will never happen in America, the Spainish people take care of their own! In America, the majority of the cultures despise each other and is ultimately the ruination of this country! What is culture in America...fat people sitting at Starbucks playing on ipads?

Wed, 01/09/2013 - 19:55 | 3138900 Acet
Acet's picture

In terms of social awareness in places like Portugal and Spain, taking advantage of "the system" if you can get away with it is almost expected of you - while for example, the Nordics have much more of a social concern (i.e. "how will my actions affect society") - hence the high rates of things like tax evasion.

However, this is compensated by the fact that they usually follow the rule of "you don't fuck-up people you know". There are also things like stronger ties with the extended family.

The American way (assuming it's similar to the English one, which is the one I know more intimatelly) is pretty much "everybody for themselves" and it's expected that you maximize personal outcomes no mater what (think how wealth is celebrated as success but not questions are asked about how that wealth was obtained). This, in my opinion, is the worst of all ways.

Certainly, what I see in Portugal (my homeland) is that as the crisis hits people are pulling together more, while in places like Holland (where I lived before) you see that they have a lot fewer problems related with high-level corruption and regulatory failures. On the other hand, the UK and the US are teeming with high-level corruption and all sort of problems caused by corporate abuse and corporate influence and seem to far more likelly to end up with large segments of the population falling down to misery and squalor.

Thu, 01/10/2013 - 00:57 | 3139794 NidStyles
NidStyles's picture

The biggest lie ever told is that people think and behave differently based upon geographic region.

Thu, 01/10/2013 - 16:28 | 3141901 Kobe Beef
Kobe Beef's picture

Totally dude. We're all the same and that's why diversity is our strength.

/sarc

Wed, 01/09/2013 - 16:57 | 3138143 Blankenstein
Blankenstein's picture

If the government will pay more (very likely) than the "real" market rate which renters pay for out of their own pockets, I'm sure "private" equity will accept section 8 vouchers.  

 

http://portal.hud.gov/hudportal/HUD?src=/groups/landlords

Thu, 01/10/2013 - 15:58 | 3141742 flattrader
flattrader's picture

For all the screaming and bitching about Sec. 8 Housing, you'd be surprised at how few vouchers are actually issued.  Do some homework for your given area and you'll see what I mean.

Wed, 01/09/2013 - 17:07 | 3138190 Whoa Dammit
Whoa Dammit's picture

Vashta,

Who do you think will be renting these properties? Section 8 tenants.

Where did the money come from for these equity funds to buy the properties? The government.

Wed, 01/09/2013 - 17:25 | 3138299 trav777
trav777's picture

they are going to shove that diversity right up your @ss.

The upside is that most of you will finally wake the fk up when it smacks you right in your face and robs your cellphone.  My advice is to learn to burn selective houses down.  Can't live where doesn't exist.

The demoncraps don't want the America of 1950...they want an america where they have an unassailable voting bloc of somalis, hatians, mexicans, etc.  They drool over when the formerly typical American is a minority.  Detroit = permanent political power.

Thu, 01/10/2013 - 00:59 | 3139800 NidStyles
NidStyles's picture

Not so much drooling over them being a minority so much as an uneducated mob. The Neo-Cons are the same way.

Thu, 01/10/2013 - 15:55 | 3141725 flattrader
flattrader's picture

>>>The demoncraps don't want the America of 1950...<<<

Why would anyone want THAT back???

>>>they are going to shove that diversity right up your @ss.<<<

Sounds like someone lost out on a job, contract etc...and is blaming it on "diversity" and now has lots of time to post to ZH?

Wed, 01/09/2013 - 16:49 | 3138094 Sudden Debt
Sudden Debt's picture

People don't want anybody to know they have debt.
So they won't protest and pay untill they have nothing left.
Debt is the perfect master. It uses shame as a silencer.

Wed, 01/09/2013 - 16:54 | 3138129 Seasmoke
Seasmoke's picture

At this point in time , it should be worn as a badge of honor.

Wed, 01/09/2013 - 17:03 | 3138168 Sudden Debt
Sudden Debt's picture

I have a twin brother.
He bought a new house with his wife recently.
So as a twin brother, we went for a drink on a saturday and like we always talk about our wifes, sex and the chicks at the end of the bar, the conversation changed about his new house.
So I asked him: bro, how much did you pay? How much did you take a loan for?

remember. my twin brother. best friend all my life. we chaired girlfriends and all.

Well he said: man, I can't tell you that!

He didn't have a problem when he had the clap from a hooker showing me his dick while puss came out. BUT HIS LOAN? HELL NO!!!!

Loans is a big taboo. Nobody has them and everybody craps money, untill your wages are paid one day to late.

Wed, 01/09/2013 - 17:10 | 3138204 Rainman
Rainman's picture

I chaired one of my brother's girlfiends too. Then he married her, which kinda sucks.

Wed, 01/09/2013 - 17:26 | 3138304 MachoMan
MachoMan's picture

Do all of your arguments end something like this: "yeah, whatever, I fucked your wife"?

Wed, 01/09/2013 - 17:27 | 3138307 Sudden Debt
Sudden Debt's picture

When we were young, my brother was complaining about a girlfriend with he was with for over 6 month about the fact that they didn't have sex for a single time.

So I told him he didn't do his moves right and that he could have sex with her in 20 minutes.
He said it was impossible so one thing led to another and we made a bet.

I went home with his girlfriend without him knowing that evening and had a affair with her for about 2 months.
I felt guilthy like hell but she was damn fine.
Than she got pregnant.... the stress.... you can't believe it...
They broke up and luckely she said she wasn't going to keep it and we went our own ways.

I paid my brother the bet and said that he won but It still haunts me.
Especially since I know that the girl married a few month later with another guy and that she had a kid a while back.
I didn't keep contact and I never knew the age of the kid she had, and that also haunts me.

It's a dangerous game, because once in a while... it can break your family into pieces.

Wed, 01/09/2013 - 17:48 | 3138424 Tijuana Donkey Show
Tijuana Donkey Show's picture

So if your identical twins, how do you do a paternity test, or do you split the check?

Wed, 01/09/2013 - 17:50 | 3138436 trav777
trav777's picture

bros before hoez

Wed, 01/09/2013 - 18:56 | 3138552 Sudden Debt
Sudden Debt's picture

It was a bet!

Wed, 01/09/2013 - 23:17 | 3139562 HeavydutyMexica...
HeavydutyMexicanOfTheNorthernKingdom's picture

simpleton

Wed, 01/09/2013 - 17:07 | 3138191 earleflorida
earleflorida's picture

that generation, the one you're talking about-- gen. 'w' has died out... nothing left but their? foolish offspring, ofspring [box'd myself in here, got to get out] gen 'x' and hopelessly retarded gen 'y'...

Wed, 01/09/2013 - 17:08 | 3138153 Dr. Engali
Dr. Engali's picture

The depression has been going on since 2000. We were able to mask a period of it over with debt, but no longer. Now the country keeps sinking deeper, slowly being managed down to third world status. The next generation will be making iCrap for the Chinese earning a dollar a day.

Wed, 01/09/2013 - 16:53 | 3138116 Seasmoke
Seasmoke's picture

Willllllllburrrrrrrrrrr !

Wed, 01/09/2013 - 16:53 | 3138123 youngman
youngman's picture

Oh the government will get their dirty little hands into it somehow......its a socialist dream is to own the housing stock...that was a big bennie in USSR days....you had to be someone...a member of the party..or a sports star to get an apartment.....a voter for life

Wed, 01/09/2013 - 16:58 | 3138146 taketheredpill
taketheredpill's picture

POTTERVILLE !!!!

Wed, 01/09/2013 - 16:58 | 3138152 Shizzmoney
Shizzmoney's picture

Debt is the perfect master. It uses shame as a silencer.

Right.  This goes for "comfortablility", as well.

I call it "Greg Smith's Dilemma".  Be a good little schill until you get yours, and then be the righteous knight that whistleblows on industry after you are done.

I do it too.  I'm out of debt by April, and I work for a company that uses cheap labor in China (despite my rants about hating neoliberalism and exploitation of workers via globalization). I don't like it, but I gotta do what I gotta do to pay the bills (until I find a new job...which thansk to this shitty economy, won't happen soon).

But if my debt isn't paid; the invisible man is going to keep hounding me, and the interest will accrue, and it will add more stress to my life.  I basically have to be a good wage slave until I pay off my debts; it's part of the game, and unlike Wall St Banks, I actually hold myself accountable for my debt (even if some of it is fraudulent via the interest rate bullshit).

Debt is a more dangerous chain that actual chains, because you can subdue slaves through debt and they'll think they are surrounded by rose petals.

The fucked part is, if you default on debt, or simply don't pay it off......you get a bad mark on your credit report, which hinders you from getting work.  In the hyprocritcal clusterfuck that is our employment system, wouldn't bankers want people to work MORE so they can hijack your taxes so they get their money back?

Wed, 01/09/2013 - 17:12 | 3138220 Mad Mohel
Mad Mohel's picture

Some people are ignorant of the fact that they are rats. How does it feel knowing that you are?

Wed, 01/09/2013 - 17:22 | 3138285 NotApplicable
NotApplicable's picture

The knots in my stomach have knots on them.

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