Are These Two Companies Proof That The Housing Bubble Is Back?

Tyler Durden's picture

As most people are undoubtedly aware, the whole point of requiring a down payment on a home is to make sure that homeowners have "skin in the game" and to prevent the kind of rampant speculation that undoubtedly comes when banks and other lending institutions make it easier for American gamblers (a.k.a. "real estate investors") to play around with other people's money.

As we all learned the hard way back in 2008, lack of discipline on enforcing down payment rules results in massive pricing bubbles in a $30 trillion residential housing market that has devastating consequences when they pop...it all results in charts that look like this:

 

Alas, regulations designed to thwart speculative housing bubbles (regulations that likely wouldn't be required if banks were simply allowed to suffer the consequences of their bad financing decisions...but that's a discussion for another post) are only as good as the latest business model designed specifically to evade them. And, as Axios points out this morning, two of the latest such business models are eerily reminiscent of the insanity we all witnessed in 2006.

The first is called Unison Home Ownership Investors and is a company that raises capital from pension funds specifically to "invest" in down payments on houses where the buyer can't afford to put 20% down.  It's a "win-win" relationship where the buyer gets to purchase a house he/she really can't afford and some unsuspecting teacher in Minnesota gets to "invest" in the equity slug of a highly levered house in Bubble Town USA.

Unison co-invests with prospective homebuyers—typically putting 10% down along with a bidder's own 10%, helping them qualify for a standard 20%-down home loan. Depending on the lender Unison partners with, a homebuyer can end up putting as little as 5%:

 

Unison's investors—who Riccitelli says are typically large pension funds with long investment time horizons—realize a profit only when the home is sold. The product is attractive to such investors because they need assets that match their liabilities, i.e. pension payments sometimes 30 or 40 years away.

 

Other than a few private equity funds that bought up cheap single family homes at the housing market's bottom between 2010-2012, there are few ways for investors to own a diversified pool of residential real estate, a market that at $30 trillion is more valuable than the U.S. stock market

 

A homeowner can buy Unison out at any point after three years—as long it recoups its original investment. A homeowner can sell the home to another party at any point, however, even if it results in Unison taking a loss.

Meanwhile, a startup called Loftium will pay you entire down payment if you just agree to rent out one of the rooms in your new house over Airbnb for a specified period of time.  But there's a catch...for now Loftium is only available in Seattle.

Loftium has an alternative strategy. It will will contribute $50,000 for a down payment, as long as the owner will continuously list an extra bedroom on Airbnb for one to three years and share most of the income with Loftium.

 

This strategy might be particularly appealing in booming markets like Seattle, where rent prices are rising even faster than home values themselves, and which are popular tourist destinations.

All of which may help explain why Seattle home prices have suddenly gone parabolic...

Well, that and all of the Chinese money that needs to be laundered...

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SILVERGEDDON's picture

No Foo Ling Market.

Shitonya Serfs's picture

These ideas seems seem solid (giggle).

Not sure why people don't take advantage of FHA first time buyer loans.

Life of Illusion's picture

 

and who buys all the MBS to make this happen

 

GOV!

AnonymousCitizen's picture

Both of these business plans will end in tears.

Manthong's picture

 

My indication that the bubble is back is the number of house-flipping seminars being offered on the radio.

peopledontwanttruth's picture

I've always said if the house flipping was so great why aren't the seminar owners doing it. Nobody shows someone their goldmine entrance.

DWD-MOVIE's picture

I'm making over $14k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...  http://disq.us/url?url=http%3A%2F%2Fwww.Jobzon3.com%3Ab8eR_DQLwGRPVGtFvv...

Dr. Richard Head's picture

After my divorce the ex bought a home for 1% down.  I was absolutely shocked that could happen again.  Now that my $3,100 a month in spousal and child support is done after one year of paying, she got knocked up and is moving in with her boyfriend.  She can't even sell the house now without bringing $10,000 to the table.  HAHAHAHAHAHAHAHA.

Like a moron, I put my 20% for a house and am making my payments on time and didn't knock anyone up again. 

yrad's picture

FHA is dead. Most lenders now have a 3% down payment option (vs FHA 3.5%) with lower mortage ins. The only reason to go FHA is if you have a credit score below 600 in which case the down payment should be the least of your/the lenders worries. I heard of a 1% down option being "in the works" as well.

Pop!

Dr. Richard Head's picture

See above regarding my ex buying a home for 1% down in June of last year. 

any_mouse's picture

Very little down and Interest only payments.

Forward to the Past.

Amaroosta's picture

They also changed the MIP rules - the MIP payments now stay for the life of the loan - they don't automatically go away when you hit 80% ltv. You're basically forced to refi no matter what (which you probably should anyway, but still).

totenkopf88's picture

My niece's family, who was foreclosed on 6 years ago just bought another home- a few percent down payment and they had to paint the place- that is their total equity in it

runnymede's picture

And the mortgagee was made whole. There is no moral hazard if there's no prosecution and clawback. Still a few yrs away fron peak banker douchebaggery. 

Seasmoke's picture

I'm waiting for a better offer to house prisoners in my entire top floor of my house.

Flash44's picture

I feel like I am a prisoner or at the very least a slave paying 1,000 a month in property taxes for my 350,000 house in Illinois. No way can someone retire in such a house unless they work till they are dead . 

sinbad2's picture

A thousand bucks a month, fuckme, and I bitch about the 2 grand a year here.

FullHedge1's picture

What sane person would want niggers in their house?

x marx the spot's picture

You should just leave comments like that in your head, among all the voices you have bouncing around up there.

FullHedge1's picture

Totally right. Forgot there were snowflakes on here.

E.F. Mutton's picture

Can you roll in a new iPhone and some hair extensions for my old lady into that loan?  Sold!

I also need 5K to pay for my Oxys....can do?

Bay of Pigs's picture

Loftium? You've got to be shitting me.

any_mouse's picture

It's Loftier!

Double (bubble) entendre naming!

Lofty, elevated, high, aspirations.

Loft, living space.

RovingGrokster's picture

Loftium keeps bubbles up better than Helium !
(Advertising tag line)

buzzsaw99's picture

i see no upside for unison from this.

 

speaking of hot chinese money i happened to note the owners of the favorite in the cotillion stakes at parx on saturday:  China Horse Club International Ltd. and Clearsky Farm.

GunnerySgtHartman's picture

Everybody say it together:

"Another Fannie/Freddie bailout, another Fannie/Freddie bailout ..."

They should have KILLED Fannie and Freddie when they had the chance!!!

buzzsaw99's picture

the fed still holds a shitload of shitty mortgages too.

youngman's picture

I bet a lot of them are dead air right now...but still on the books at 100%....they will be the first to go in the balance sheet reduction....just move it over to the credit side...and print a little cash to cover it

GotAFriendInBen's picture

No way

They sold everything at a profit

They told me so

buzzsaw99's picture

the bernank tried to sell some of that maiden lane crap at par and the market puked all over his ivy league tie.

Father ¢hristmas's picture

Ads offering to teach people how to flip houses on my local dindu radio station is proof the housing bubble is back.

Ban KKiller's picture

What about those crooks at CoreLogic, Black Knight or Nationwide Title Clearing? Fraud machines! 

Look up DOJ vs. LPS....

Hkan's picture

another catastrophy......when BIG BANG gonno go off......

Blankfuck's picture

WELCOME TO FED RESERVE FUCKERS WORLD! Land where the banker fuckers and elite bought the fucking housing market so you the looser end user pay high rents and HIGH prices! You losser loose to them banker fuckers and friends they lent to. THIS WAY THEY COLLECT ALL YOUR FUCKING MONEY FOR THEMSELVES!

 

LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOLLOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOLLOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOLLOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOLLOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOLLOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOLLOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOLLOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOLLOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL LOL

Now kiddies, Its ok for the cops to kill terriots but not allowed doing so on fed reserve fuckers or banksters.  Just keep your high payments up and all will be just fine! Not terriosts here but slave owners they are, yes!    -----shhh  nobody can figure this out by looking at it this way or gods work by exposing it-----------shhh

Black Warrior Waterdog's picture

Fuck this real estate "market."

wholy1's picture

Housing/real estate, similar to Equities, chasing the PRIVATELY-held [NOT]Federal[NO]Reserve FIAT debt-credit largess - regardless of "insinuations" to " shrink the 'balance sheet' " (sic - LMAO)?

Henry Chinaski's picture

If you want to get rich in real estate, never sell.

The last lesson on Moral Hazard didn't take. Probably never will.

sinbad2's picture

America runs a form of corporate socialism.

The problem with socialism is eventually you run out of other peoples money(Margaret Thatcher)

The end game is near, the people of the world have run out of money and can no longer support the US.

runnymede's picture

You're either on one side of the debt equation or the other. It's about a 95 to 5 ratio. It's a bankers' world. Same as it ever was. I still see a jubilee of some sort in the future. Otherwise the stampede will lynch the bankers. Likely in exchange for ownership you will get use of the property if you remain docile. Can't see any other way. Whatever form it takes, it will be in perpetuity.