Buy-To-Rent Is Officially Dead In California

Tyler Durden's picture

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

I’ve chronicled the saga of “buy-to-rent” for well over a year now. From some of its most exuberant phases to its now epic retreat (investment firm property purchases are now down 70% year-to-date).

It seems as if the pullback of private equity and hedge funds from this asset class is even more brutal in certain regions, with Blackstone now reporting its purchases in California down a staggering 90% this year.

Not to worry, I’m quite certain unemployed and deeply indebted recent college graduates will soon pick up the slack due to the anticipated resurgence of subprime lending.

From the LA Times:

This time last year, investment firms raced to buy dozens of single-family homes in neighborhoods from Fontana to South Los Angeles to lease them out, transforming the mom-and-pop rental business into a Wall Street juggernaut.


But now the firms themselves have all but stopped buying in Southern California, the latest evidence that home prices have hit a ceiling. The professional investors no longer see bargains here.


The real estate arm of Blackstone Group, the largest buyer, has cut its California purchases 90% over the last year, a spokesman said. Santa Monica company Colony Capital reports a similar retreat. Oaktree Capital of Los Angeles, meanwhile, is looking to cash out by selling its portfolio of more than 500 homes, many of them in Southern California.

But prices have since been flat in Southern California. Many families are taking a pass on the more expensive homes. And the math doesn’t work on Wall Street either.

“Prices have gotten to the stage where we cannot buy a house, renovate it, rent it and still make a reasonable return,” said Peter Rose, a spokesman for Blackstone, which owns roughly 41,000 rental houses nationwide. “There was a moment in time where it made sense.”


On Wednesday, some of the bigger players launched a trade group, the National Rental Home Council, to advocate for their interests in Washington.

Yep, just what we need.

"People want to live here, whether they buy or rent,” said Gary Beasley, chief executive of Oakland company Starwood Waypoint Residential Trust.
“Most of the low fruit has been harvested, but there’s still plenty of fruit in the tree,” Beasley said. “And we’ve got fruit pickers.”

Seriously, where do they find these people…

Full article here.


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Its_the_economy_stupid's picture

investment firm property purchases are now down 70% year-to-date


This is not a retreat.


The buy to rent crowd simply owns it all now.


Haus-Targaryen's picture

Yellen "Crap, printing isn't doing it anymore.  What can I do to get people to start spending money again."

Krugman "You could try and establish a housing bubble based on subprime loans.  There are millions of Americans who want a home, but cannot afford one because they are not credit worthy.  If we were to extend credit to these people, in large numbers, then I think that would do the trick."

Yellen "Ok sounds good. What could go wrong?"

LawsofPhysics's picture

pushing all the risk to the underlying currency....

Shocker's picture

The Housing market is spent, until at the very least the Job market stablizes.

Layoff / Closing List:


CrashisOptimistic's picture

Fruit pickers!!!

Why doesn't that suggest to someone to BUY A FUCKING ORCHARD AND ACTUALLY HAVE FRUIT TO SELL?

El Vaquero's picture

Because, ummmm, uhhhhh...




Wait, what was I saying?  When is Dancing With The Stars on?

BigJim's picture

Actual stuff is so 20th C, dude! Get with the program - we're now creating wealth with our latest bit of creative financialisation.

FBS* will liberate orchard owners from the tedious and back-breaking toil of actually producing fruit, and enable them to sit at home sipping Pina Coladas while watching their FBS trade ever higher on their Bloomberg terminals. THAT is progress!

*Fruit-Backed Securities 

BigJim's picture

Of course, the more orchard growers switch from growing fruit to creating CFOs*, the less fruit will be produced, so the higher their FBS will trade. It's a win-win!

*Collateralised Fruit Obligations 

thamnosma's picture

The fruit pickers will be the first in line for the new sub-prime market.

Miffed Microbiologist's picture

There are many here that did that. Now they are being denied water. All the fantastic fertile land in Cali is for naught without water. Of course you are probably speaking metaphorically.


SmackDaddy's picture

Was looking at the central valley on google maps.  Honest question from a midwesterner;  is it green (esp the southern half) b/c it's "fertile" or b/c it's irrigated?  Perhaps fertile to you = sunny.

Miffed Microbiologist's picture

Actually smack daddy the soil in many places is rich and loamy. Growing up in Malibu and Ojai we traveled to LA and the Central Valley frequently. Some areas had clay but most was very good. Water is the issue. When I went to WA, I was amazed how many people dry land farmed with good success. I'm not sure if that is possible in many areas of Cali. No way where we live now in the San Diego area but we live in the mountains. We amend our sandy soil with chickens and horses. Without the well we could not grow what we do. Sunny means longer growing season, certainly by no means do I imply that = fertile land.


daveO's picture

Corps know you have to have shelter before figs.

El Vaquero's picture

The job market has stabilized for the time being.  It dropped precipitously post Lehman, hit a new normal low and has been bottom bouncing for the past 5 or so years with new jobs just keeping up with population growth and being mostly shit jobs.  It's stable and it sucks.

Rafferty's picture

True but the quality of the the jobs and the corresponding pay and conditions have all deteriorated.

Manthong's picture

“the anticipated resurgence of subprime lending”

2 -4 -6 – 8.. Watch the Fed “Accommodate”

Milestones's picture

Gee wizz, we have to go thru 3rd grade-again. Let's hear it for sub prim.              Milestones

RaceToTheBottom's picture

You got to hand it to the WS Banksters, they do negotiate well.

They will get more guarantees and free money to keep the illusion of a Realestate Market going....  But John Q Public will get nothing....   Except the bill.

tarsubil's picture

Push cheap credit to the little guys which will ultimately lead to a credit implosion. Give free cash to the elites which will buy everything on a discount. Gee, doesn't seem right to me.

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered." - Thomas Jefferson

daveO's picture

By Far, Jefferson's best quote.

greatbeard's picture

>> Jefferson's best quote.

Well of course it's his best quote.  He didn't say, or write, that.  More BS, repeated over and over again.

tarsubil's picture

There is no current documentation of it. This does not preclude there being documentation in 1933.

PlusTic's picture

there are no mkts that aren't just a "game" anymore...fundamentals are dead, long live fundamentals

Doubleguns's picture

Maybe there are no more houses to buy. hahahahahahahaha



edit:  Damn its-the-economy your beat me to it. 




starman's picture

Here in Socal it starts smelling like 2008! And I've been saving just for that. 

Cursive's picture


Yeah, but what is price equilibrium?  Prices never fully reset to equilibrium in 2008/9 because the Fed and .gov arrested "free market" activity.  Now, no one knows what real prices are.  Even afer a 30% price plunge, you could still be 50% or more over-valued once the ZIRP/QE punchbowl is removed.

thamnosma's picture

Absolutely, only a fool is salivating at some marginal drop in California unreal estate.  Until the feds stop protecting price levels (like that's going to happen) or forces beyond the feds end it, you'd be insane to buy there.   The prices, for what one gets, are still surreal.

Nick Jihad's picture

I live in LA, and I've been noticing how often the kids move in after their parents pass on. It keeps properties off the market, and keeps people in homes that they could never afford to buy. I don't know whether this is more common than in past generations, but it's worth noting that in single-child families, which are more common today than in the past, there is no need to sell the house in order to divide the estate equally among the heirs.

disabledvet's picture

what was the deal with that earthquake in So Cal?

they had one in Yellowstone too.
"first time in many years."

Blue Horshoe Loves Annacott Steel's picture

It was the Russians & Chinese dumping Treasury bonds.

Blue Horshoe Loves Annacott Steel's picture

Oops, it was home prices crashing.

Gift Whores's picture

It was actually my Elite 8 bracket crashing.

Doubleguns's picture

Disabledvet, there are quakes in yellowstone all the time. Size matters however. Check out this site to view the quakes around the world.

LawsofPhysics's picture

It is a rentier (robber barron) world again folks.

The real owners want their dues...

eat your fucking peas and pay up..

This will "end" like it always does so hedge accordingly.

El Vaquero's picture

Fuck the peas.  Let us go eat some cake!

SDShack's picture

Eactly right. I've been saying it for years... what's coming is the New Feudal World Order. The evidence is all around us, and the headlines prove it everyday.

daveO's picture

Corp's buying rental houses says it's already here! 

Cursive's picture



On Wednesday, some of the bigger players launched a trade group, the National Rental Home Council, to advocate for their interests in Washington.



thamnosma's picture

There's another group to be designated for the guillotine.

insanelysane's picture

This group will advocate that the government should spend "as much as it takes" to house the homeless in their rental properties.

daveO's picture

Also, that they need a bailout to support said deadbeats when the market tanks.

Hongcha's picture

Oh my, you would not believe how overbuilt places like Emeryville are for condos - sprouting up along San Pablo and Hollis Streets like mushrooms.  How are they going to sell all these?  My guess is, that's another trick up the fed's sleeve ... "houses for Gen Y."  3% down, guaranteed loans at 5-6% for starters to sell these condos.  They have to keep the plates in the air.  Watch the SF Bay Area very closely ... it's the last bird standing in the coalmine, gentlemen.

thamnosma's picture

I see more crap going up in the southern California "Inland Empire" and there's already a glut.  I don't get it.

Rafferty's picture

 How are they going to sell all these?


Import millions more 'undocumented'.

nightshiftsucks's picture

I live in the SF East Bay Area and houses are starting to sit,I see a bunch more open house signs.

onewayticket2's picture

I hear military grade weapons are moving briskly in SF....


Hongcha's picture

Yee wanted to be a warlord in the Phillipines.  I rather respect him for taking a chance; I mean, what fucking difference does it make?  Much preferable to the wheedling, finger-wagging crones that run California - Boxer, Feinstein, Pelosi.

Yee is of course a complete hypocrite but he had a goal and wasn't pissing himself in the presence of weaponry, like these beetches named above...

Cursive's picture


I'm in a backwater community of Louisiana (which is to say, just the opposite of SF).  The housing market here never "overheats," but by the same token, it never really stagnates.  Well, it's stagnating.  Realtors, as a group, rarely complain because they wish to maintain the "it's never been a better time" meme above all else.  My neighbor was complaining last week about having to price her house at a loss after commissions (and that assumes that she gets full asking price, which she conceded is a long shot).  It's bad and it's getting worse everyday*.


* Excluding Wall Street, bankster types and the 0.01%ers.

SDRII's picture

Qatar is part of UAE: Dubai security official

A good referendum on Obama's success in Saudi. The GCC rift continues to escalate.