Salient to Investors:

Jonathan Gray at Blackstone said:

  • Investors have less than 2 years to buy foreclosures before competition and rising prices shrink the pool of cheap assets.
  • The opportunity for funds to buy homes at discounts could last less than 2 or 3 years and the recovery in house prices could surprise people.
  • The US is not building enough to keep up with population growth.
  • Blackstone has spent $1.5 billion on 10,000 foreclosed properties in the US in 2012 and is buying $100 million of houses a week.
  • Blackstone paid less than $150,000 on average for homes that were valued during the 2006 peak at more than $300,000.
  • Blackstone is focused on 10 markets, including Northern and Southern California, Phoenix, Tampa, Orlando, Atlanta, Chicago, Charlotte, Las Vegas and Seattle.

Home Depot Q3 earnings beat analysts’ estimates.

Walter Molony at NAR said home prices have risen year over year for seven consecutive months, which hasn’t happened since 2006. The median price of used homes rose 11.3 percent in September, the biggest year-over-year gain since November 2005 as inventories dwindled. The NAR predicts the median existing-home price to rise 6 percent in 2012 and 5 percent in 2013 and 2014 – if housing construction doesn’t return to normal, prices could accelerate.

The number of homes for sale is drying up as funds snap up foreclosures to rent out and owners remain reluctant to sell until prices rise further. Inventory dropped 3.3 percent in September to the fewest for any September since 2002.

Despite the cost of borrowing at record lows, many potential homeowners lack the money to buy, buoying rental housing and drawing in institutional investors.

Colony Capital has bought 5,500 homes since April and expects to reach $1.5 billion invested by the end of 2013. Waypoint Homes has bought 2,500 homes and expects to have 10,000 homes by the end of 2013.

Colin Wiel at Waypoint Homes sees this as an evergreen opportunity.  Wile says that investment yields will drop from today’s 7 percent, excluding debt, to apartment-property yield levels of 5.5 percent – institutional investors will be comfortable with this level of yield because the asset class will be ‘established’ by then.

Read the full article at http://www.bloomberg.com/news/2012-11-14/blackstone-sees-two-year-window-to-buy-houses-mortgages.html