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70% Of Brooklyn Home Sales Are To Hedge Funds, Investors And International Buyers
It has been over a year since we listed the three "pillars" of the latest dead cat bounce in the housing market. Recall: "the REO-to-Rental subsidized investment program, which led to an epic surge in demand for multi-family housing, i.e., rental, units was, together with offshore investors parking their cash in the US for safekeeping (taking advantage of the NAR's anti-money laundering check exemptions) and the big banks Foreclosure Stuffing, the key reason for the recent, stimulus-fueled and quite transitory bounce in house prices in assorted markets." In other words, the latest artificial move higher in the housing market had nothing to do with an "improving" economy (and implicitly, everything to do with the epic injection of liquidity by all global central banks and chinese loan creation). Today we got confirmation that once again we were correct: to wit: "Douglas Elliman rep: 70% of Brooklyn home sales going to hedge funds, investors and international buyers."
In other words, just over two thirds of the "bounce" in the Brooklyn housing market has - much to the chagrin of hipsters everywhere - been due to the REO-to-Rent program and various other initiatives to make Wall Street America's biggest landlord, as well as foreigners parking hot cash in the US, for money laundering reasons or otherwise.
Standing in the dining room of the early 1900s-era brick rowhouse, deep in the Bushwick section of Brooklyn with not a frozen yogurt shop or Starbucks to be found, Alan Dixon, an investor from Australia, struggled to tally the houses he had bought in the area over the last year.
“What, 70? 72?” he asked, raising his eyebrows in question at a group of investors, contractors and designers standing nearby. A dozen construction workers scurried around, fastening plasterboard to walls and laying tile on floors, readying the four-bedroom house that the group purchased in June for $635,000 for leasing in less than two weeks’ time for as much as $5,490 a month.
Finally, someone locates the number on a piece of paper — 70, later corrected to 71. “That sounds right. Something like that,” Mr. Dixon said with a laugh, tugging on the cuff of the pink shirt he wore under his gray suit jacket.
It’s easy to understand why it might be difficult for Mr. Dixon to keep track. In just two years, the investment fund he oversees for Australian investors and retirees has purchased more than 538 homes, townhouses and brownstones from Jersey City to Queens and Brooklyn.
Mr. Dixon and his investments in New York area residential real estate are a microcosm of a much bigger trend sweeping the country.
A handful of large private equity and real estate investment firms, including the Blackstone Group and Colony Capital, have bought billions of dollars’ worth of single-family homes in some of the areas most affected by the housing collapse. The goal for these Wall Street investors is not to buy and flip the properties for a quick profit à la real estate bubble of the early 2000s. Instead, they are hunting for steady, dividend-like returns they believe can be earned by renting out the homes.
...
“I’d say by the spring, maybe 70 percent of the sales we were seeing were to hedge funds, investors and others taking advantage of what was happening in Brooklyn,” said Stephanie O’Brien, a real estate broker with Douglas Elliman in Brooklyn. “Only about 30 percent were actual end users or first-time buyers.”
The higher prices have changed the character and makeup of neighborhoods, often pushing more lower- and middle-income families farther east in the borough. “What’s happening is good, because it increases real estate values, but on the other hand people who have been living in these neighborhoods and hoping to one day buy or rent a larger apartment are getting priced out,” said Ron Schweiger, the Brooklyn borough historian.
So with 70% of "buyers" accounted for by the Wall Street investment and the international money laundering community, the other 30% or so of the appreciation has been banks continuing to keep millions of shadow inventory units off the market, creating an artificial subsidy and pushing prices higher due to a fake housing shortage.
Oh, and no so-called recovery.
h/t fonzanoon
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Thanks Tyler!
The shit gets deeper by the day fonz.
Hand me that shovel over there...
It's actually much much worse than you think. The funds run by the outfit in the article are Ponzi schemes. Dixon funds, including URF.AX, purport to pay its dividends out of received rents, but actually pay them straight out of capital raisings.
See my recently updated blog on Australian financial crime for more details:
http://drbenway.blogspot.com
So, um, Fonz, how do you like your new neighbors? Have they invited you over for some shrimp on the barbie or a cold Fosters yet?
(NoDebt says, snickering, knowing, KNOWING, this couldn't be going on near him since he's not too far from Philly which could be the only place on earth more toxic than Fukushima)
Well somebody save the cheesesteak then, and fork the city.
i'm long detention centers
What really sucks is that the condo I sold for $400k in 2009 is now re.listed for $800k+ thanks to these foreign buyers .... I guess I should be glad I did not pay roughly $75k in property taxes over the last 15 years, and inflation took care of the rest of the spread.
"Press 1 for Spanish, Press 2 for Urdu, Press 3 for Chinese. Hang up if you speak American."
good find Fonz...a little research on your last trip out east?
my sister lives in Brooklyn. she emailed me the article. I linked the ZH article about China above to the local Brooklyn paper she sent me. maybe...just maybe we can help one frustrated hipster find the truth.
If I remember correctly, there are a ton of empty buildings in Williamsburg, which were meant to be sold as condos. Along with that, developers are still throwing up new buildings all over. Of course in true NY fashion it is taking forever. So it amazes me why 5 points has been slated to be torn down and new condos put up. With all that new construction in Long Island City (near the old Pepsi factory) there would seem to be more supply than there is demand. Yet rents in Brooklyn are out of fucking control, and prices to purchase are just....well. You know.
I find myself wondering why kids from the mid-west continue to pour into NY. It only puts them in a position of weakness, in terms of quality of life.
Thanks fonz.
don't know about the housing aspect, but i just took out a third mortgage to buy a "get in on the ground floor" piece of the Brooklyn Bridge, anybody need the address to the............................
#strongbuy
If the purpose of QE is to bid up the hard assets of the uberwealthy then: WINNING.
Your land is being stolen from you. Everything else is just smoke and mirrors.
Won't these investers be thrilled to death when the real estate asset bubble bursts yet again.
It'll be a race for the exits. I'm acquainted with the family who owns the horse farm right around the corner from me. The old lady runs the show and her adult son is a realtor. Both claim that business is booming and that properties are selling like hotcakes. The old lady knows better but is covering up for her son. I can tell by her facial expressions and tone of voice that it's hard for her to lie. The other of course...well he's a realtor.
You need to capitalize the word Realtor(R) as it is a registered term designating membership in the National Association of Realtors. Not all real estate agents or real estate brokers are Realtors(r), but all Realtors are licensed thieves, I mean, professionals. I know this because I am one. As a Licensed Broker, Auctioneer and Certified General Appraiser, I have been horrified over the years by what this group does.
They force their members to pay huge fees and then use them to put ads on TV saying, "Now's a Great Time to Buy Real Estate". They run it for a few year while the market is peaking and crashing, then remove it. I sent letters regularly to the president of the NAR, but, obviously, never got a response. Scumsuckers.
The NAR also takes money to lobby congress for thing clearly not even close to being in the best interest in the consumer. One is the requirement that every seller sign a Property Condition Disclosure or pay a $500.00 fine to the buyer at closing. That fine, contrary to popular wisdom, does not inoculate the seller against latent defects. Even so, the Realtors got the bill passed and are now trying to get them to raise the fine to $3,000. They do this so they can protect their asses and say things in court like "I had no idea they had an underground oil tank. They never told me and they never filled out the property disclosure. They just paid $500." This is a ruse used in place of agents doing something called, their fucking job. By the way, you'd be amazed at the # of Realtors without a day of college and many without even a HS degree. Yes, the little known secret is that this is one of the least educated groups in America. They put all the letters after their name Joe Schmuckenputz, Realtor, CHB, CHS, CBR, etc. These things stand for such bullshit as Certified Buyer Representative, Certified Home Stager, etc. It means they've taken a two hours class and they pay an annual fee to the group smart enough to register the next set of 3 letters. The more letters after your agent's name, the more insecure and full of shit they will be. It's like a guarantee they failed out of SPED.
It is brutal being a real estate broker. I actually had passed all tests and all requirements to obtain my sales license, and waited as long as I could because I really never wanted to have to admit, "Yup, I'm a real estate agent/broker." When I was a simply country auctioneer and appraiser (not for banks - for estates, trusts, etc.), people trusted me. The second I added broker or salesperson to my business card, I got started getting a different look.
Do you know anyone over the age of 25 who has rented, bought or sold real estate and not been screwed somehow by a Realtor? It's about the sleaziest group you'll ever meet. Now, they've sold our to Zillow & Trulia. All MLS info is now on their sites, and agents and brokers have to pay to be shown on their own listings. Isn't that special? The NAR and local MLSs (which are the For Profit portion of the local associations of Realtors) make a fortune selling them our work, and then Zillow and Trulia (and now 1/2 dozen other sites) all make you pay them for access to your own zip code. The scams never end. And yes, I'm just jealous I didn't think of it first.
(Sorry for the rant. It's hard to soar like an eagle while working with turkeys. I also apologize to the solid, hard working, honest, agents and brokers out there. There are a few, but they are great and a true breath of fresh air.)
One last thing I was taught at about 10 years of age: never believe a word said to you by a Realtor. If they are lying, you didn't fall for it. If they are telling the truth, you still come out because you made them prove what the said. For example, "The seller's have a higher offer, you'll need to raise your bid." Your answer, "Oh, tell your homeowners to sell it to the person offering more money and not be so foolish as to consider my lesser offer." You'll see the agent change their tune quickly about nine times our of ten.
Final word: Brooklyn will crash as the crime-riddled county full of the "Hipsters" will sink back to the squalor it saw from 1950 to 2000. During that 1/2 decade, the white flight to suburbs, the crime and the filth caused Brooklyn to looked down upon. The past 15 or so years have seen tremendous growth. However, it also has coincided with the terms of the two best mayors we have ever had. These mayors were tough on gun violence and crime in general and fought crime street by street. The new communist elected to office in the city will have it on its knees in no time. First, the Hipsters will run home to their parents after their parents find out about the third mugging or robbery on their street. Second, the main tax base will be gone. Third, prices will crash as the number of assholes willing to pay the same amount for a shit-box in Williamsburg that it cost a decade ago to buy on Fifth Avenue in Manhattan will disappear. Then, in 2030 we'll watch the mini-series called "Brooklyn is Burning" as we see a modern repeat of the Bronx in the 1970s. Then, the rest of the Italians will move drive with their belongings over the Guinea Gangplank a/k/a the Verrazano Bridge. They'll move next to the rest of their family who moved their in the 1980s. The Irish will all run to Belle Harbor and the rebuilt Breezy Point Coop, and all that will be left will be minorities and the Hasids.
That, my friend, is a guarantee. (Except the movie - that's just a guess.)
Thank you. The main thing I learned from your post is that the NAR is essentially a GUILD which attempts to corner the market through coercion and nefarious legislation which prohibits or at least strongly disuades competition in the marketplace. They might as well just carry baseball bats and break knees.
The lack of education I already knew about. Most are so sleasy it's ridiculous. When I was actively trying to buy 3 or so years ago I had more than one try to get me to sign some sort of "sign these papers which bind you to only working with me as your exclusive realtor" garbage. I saw through the scam and always asked why anyone would want to bind themselves to someone like that and have to pay a penalty for breaking it.
Would you go to a used car lot and sign some paperwork which binds you to working only with the first agent who happens to stalk you as soon as you exit your current vehicle?
Be happy you have common sense. People are suckered into signing these documents every day. The agent says, "Well, don't you want to be working with an agent is working just for your best interests? You know, if you go directly to the listing agent, they're working for the homeowner."
The reality is - both brokers are working for themselves and have only one goal in mind, to make money for themselves. Therefore, the only thing that is nearly guaranteed is that the agent will do is tell the buyer to offer more and the seller to accept less.
I had a few agents who worked in my office who always did the hard sell to get buyers to sell the docs you mentioned (Buyer's Brokerage Agreements). They were so proud after their 1/2 hour presentation that the people signed them. The best part came, though, when they had an appointment for later that week and the buyer, mysteriously, always had a dead parent, a sick kid, a car accident or some other reason they couldn't make it; they'd never call back. I'd always laugh when I heard the phone call come in, "These buyers have no respect for my time. They said they forgot they had to be in a wedding this weekend." It was great. These agents spent more time in the office trying to convince people to sign documents while other agents were actually getting houses sold in the same amount of time.
But, W74, you hit the nail on the head!
"Never been a better time to buy"
In the mean time housing is crashing.
Then there were the developers trying to off-load condos they were stuck with flying planes with banners above the malls. "Now is a good time to buy, free upgrades...". They ended up loosing with bankruptcy.
Get used to hot bunking.
Australians are thoroughly convinced that real estate can _never_ go down.
Definitely.... I spent 3 years in Melbourne and real estate prices are WAY higher than NYC, rather shocking for a city whose retailing and manufacturing sectors have totally dried up and where all they have left is piggybacking on Western Australia's mining boom. Urban sprawl is running so out of control that people consider places a 1 hour drive out in (decreasingly) light traffic still part of the "City of Melbourne", and row after row of ugly cookie cutter subdivision developments continue to be put up left and right, further and further out. Mass transit is total garbage, and the government's idea of combatting the increasing unaffordability of homes is, of course, to provide incentives like the "first time home buyer" grant, just inflating the bubble further. Traffic commuting into town is a complete nightmare, I would actually say worse than NYC because nearly everyone has to drive. As with our politicians in the US, the order of the day is sustaining this "Australian dream" of owning home at any cost and with absolute disregard to the idea that this could result in an apocalyptic asset bubble.
Unbeknownst to many, the average Australian home is actually larger than the average US home -- they out McMansion us and use more energy as well, in addition to staggering private debt. The real estate market is like a continent-wide version of Las Vegas or anywhere else the subprime bubble ended up popping in a dramatic way.
Do you surmise the same thing is happening in Canada?
I'm less familiar with Canada, but Toronto sure looks a lot like Melbourne from an urban planning perspective.... a whole lot of sprawl and cripplingly expensive homes. And I've heard Vancouver's market is totally through the roof. Plus theres the common aspect of a commodities boom causing a virtual golden age in Alberta/Western Australia. I think Canada's economy is a lot more diversified than Australia's, though, which is so overwhelmingly reliant on mining and which has such a suddenly strong dollar that it might as well be added into the official definition of "Dutch disease", and I guess with so little else going on, a lot of hot money gets funnelled into real estate with the public really not knowing what else to do with it and with the public in Australia being very inexperienced with what happens when asset bubbles burst....
Inexperienced as to bubbles bursting is the understatement of the century.
The boomer sheep here are lined up to be fleeced, in their hunt for "yield".
Never mind the principal, just give me 2-3 more percent. If you're a sheep, you're born to be shorn I guess.
100% correct Freedumb.
Sydney is even worse.
It is worse than that. "Negative Gearing" tax benefits making mortgage repaiments in investment properties tax deductible made evenyone into property "investors".
And that joker Fisher from the Dallas Fed has the chutspah to come here and say that households will be ok 'as long as they don't overleverage"
http://www.brw.com.au/p/investing/richard_fisher_australia_bubble_2OPU7udlSp05WEfTla8tQJ
Guess what, sunshine? That ship has sailed. One of the highest private debt to GDP in the world all but guaratees Australia is up for a rude awakening.
The new government is also making noises that they are are going to try and blow a student loan bubble next, you just watch it.
Thanks for the link The_Prisoner... I'm sure the "unique factors" referenced in the article which are buoying housing prices are just as reliable as the "unique valuation methods" which carried us through dotcom boom 1.0! The fact that numerous international cities are having their real estate bid up frantically by wealthy Chinese investors seeking to cover their asses could only be interpreted as a positive bullish signal on China by our currently braindead market, figuring this means they are reaping the bounty of excess wealth.
It's a total bullshit story.
So one realtor estimates their sales as being 70% to funds, etc? That isn't the same as saying that 70% of all sales are the same way. Realtors tend to run with what they know, so if one sells a property to a fund, then they might think it is a good a idea to market to other funds. Or call that same fund back when they have another listing.
This is Amerika, facts don't matter. Torture them until they say what you want them to.
That being said, doesn't really dilute the reality that it's happening at a much larger ratio than should be normal given the amount of Feral reserve manipulation.
Aparrently u haven't been payin attention..this is but one story revealing what even Lamestream Financial Media has accurately exposed as widespread...or do u agree with lying ass Bernanke and Wall st. whores that there "aint no housing/debt/equity bubble????? Why the fuck u think the Moneychangers r moving to create derivitive flim flam products to sell to the clueless yet again??????wake the fuck up dude....
Are you familiar with the area in question? And by familiar I don't mean a google search, or a weekend visit. That area of Brooklyn is a fucking shit show.
Problem with being a resident in Brooklyn is that you're never more than four or five blocks away from The Projects. Only someone who's never been there could be dumb enough to blindly invest in a burrough thats mostly run by slumlords.
All the bedbugs live rent-free...
Having lived in Greenpoint and now residing in Bushwick (both are in Brooklyn for those not familiar with the borough of Brooklyn) I can vouch for the massive buying spree that is ongoing. And yes there are many HFs buying but also large RE Development companies as well.
Hipsters with Wall Street parents paying the rent are expanding out from Williamsburg and are even Hipsterfying Bedford Stuyvesant! Meanwhile Mexican / Central American / Puerto Rican / Chinese renters are cramming multiple families into 2 bedroom apartments or moving to the far east of the subway lines. Even Hipsters (without Wall Street $ - theirs or parents) are stacking beds into illegal warehouse lofts and holdng raves on the rooftops. If you go to the clubs in Brooklyn or the Lower East Side you would think the economy is hitting all cylinders. Of course most of them work 5 part time jobs and apprentice (for free) with local film companies or wait tables at aforementioned clubs / restaurants. Hey they can get laid or high anytime they want. What more do they need right?! LOL
All I have to say is FUCK YOU BERNANKE!!!!!
This is truth.
I enjoy seeing the "new" condos on the water front in Williamsburg. Studios starting at $400-500K. They mostly appear to be empty for the last few years.
Ha.
I'm waiting for the punch line of this joke that has been going on since March of 2009.
I guess it's actually physical comedy that ends when you get hit by a bus driven by Ben Bernanke.
Well, PM's have been monkey-fucked on a regular basis, just like this morning. The punch line from TPTB is FUCK YOU, we're manipulating the markets and there's not a damn thing you can do about it.
I remember the days when everybody was certain that the Japanese were going to take over midtown. I believe they got their asses handed to them.
P.S. good find Fonz
Yep and we(the debt slaves of the US) got our asses handed to us in 08/09.
Quite. What will they do, repatriate property? It's in North America, idiots, the most geographically isolated continent in the world. There great white north on the top, RELATIVELY good Mexico to the south (I love native Mexicans, some of the best people in the world if you ask me. Honest, good, smart, dependable, hard working people. And lovely women. I think they will be the ace in the hole for the USA when we legalize drugs)
I'd rather own phys gold if I were them. I think they are hoping to sell to a greater fool. The property market is mighty big, and the exits are might small. Sounds like the ultimate bull trap to me.
Its also been entertaining to read the comments section of this linked article, everything from whiny brooklynites to ZH afficianado's
Brooklyn has the best fucking pizza and heros in the world. I was born there. I can still remember Ed's Deli on Kings Highway. Brooklyn was the place to be in the 70's.
Brooklyn has a lot of great things going for it: Amazing street art, tons of restaurants, live music every night of the week at hundreds of venues, people from all walks of life, funky boutiques / thrift shops / markets, etc.
The main problem is that too much free FED printed FIAT is flowing in driving the prices up on everything. Williamsburg is now in the rapid changeover from funky / artistic / entrepreneur run stores and restaurants to Starbucks / Loews / GAP / HF owned Condos et al. This will expand to the other boroughs and Brooklyn in 10 years will be NYC East. Unless the bubble bursts.
No doubt Spaulding, I'm still living on the patch of dirt, just a bit further east lately. I like the country feel and access to the ocean
None of the major reo-to-rental funds are buying in Brooklyn. Too expensive.
The hedge funds are accumulating SFR type real estate partly because they are conjuring up new "investment products". They initially pay all cash for the houses and then have the bond desk make various tranches of debt, get a ratings company to stamp them with a high rating, and sell to the muppets. #NextBubble
May they be blessed with squatters and tenants that don't pay their rent!!
These guys make NRA Larry look merely like a carny barker at the local circus.
Stayin' alive,
Stayin' alive,
Ah, ah, ah, ah,
Stayin' aliiiiiiiiiive...
and the hipster rental bonds that wall street will be trading en masse soon...
ah f*ck it all
http://online.wsj.com/article/BT-CO-20131104-712296.html
Obama you bail out Wall Street again.
Yelland print that trillion+ once Asia dumps the short end.
OWS, your real enemy is that idiot president and the FED. Go to it
Is it not the case that in Europe, there are more renters than buyers? Could it be that what is going on the "new worlds" of Australia, Canada, USA actually took place a long time ago in Europe? So is the pillage just continuing and spreading? I live in Toronto, am selling my house (in Montreal) and will be renting as it makes no sense to spend $500k on a 700 sq.ft. 1 bedroom when the taxes and condo fees are $1000 - $1500 per month to start. And there are many new buildings where most of the ownership is foreign and definitely not owner-occupiers. There are the haves and the have-nots and it is getting worse.
Damn the real estate cheerleaders who say things are looking bright.
Important to bear in mind that homes taken off the market by cash transactions with private money won't create a financial crisis owing to over-leveraging. And if the properties cash-flow as reasonable investments, these sales liquidate debt and add to inventory of rental housing available. If they don't cash-flow, only the private investors go broke and -- unlike banks -- they won't be bailed out by the general public.
Until the massive debt is liquidated, the economy won't go anywhere except by pumping it with even more debt. How the debt liquidation occurs is far less important than that it does. And it's never going to be pretty.
LOL - and just where do you think that cash is coming from? that "all cash" transaction is levered to the hilt.