Florida Housing Market Being Held Hostage by Hedge Funds

NORFOLK, Va. - Nov. 21, 2013 - PRLog -- Now, local real estate agents and rental property managers wonder how long the buying spree can continue. Prices are rising rapidly across the Tampa Bay area and nationwide partly because of the tight market for rental homes, making them less of an attractive investment. Meantime, the investors appear to be struggling to satisfy their voracious appetites for rentable homes.

Big-money investment firms called hedge funds are calling real estate agents daily seeking to buy homes before they're even listed for sale on the Multiple Listing Service. Realtors report that investors are buying homes they wouldn't have touched several months ago, including townhomes and homes in the upper $200,000s and $300,000s.

For Cash and other first-time homebuyers, the eventual slowdown can't come soon enough. To compete with investors, the 27-year-old Tampa man is having to bid on a house the same day he tours it.

Tampa is part of a nationwide boom in the single-family rental business, where investors buy up foreclosed or distressed homes on the cheap, fix them up and rent them out. The idea is to sell the homes in several years when prices rise, generating some cash flow in the interim by renting them out.

The biggest such investor is the giant private equity firm Blackstone Group, which now owns some 29,000 homes nationwide through its subsidiary, Invitation Homes, Invitation's chief operating officer, Marcus Ridgway, told the Tribune Monday. Locally, Blackstone has been investing in Hillsborough County at least since August and through mid-May had purchased at least 928 homes in Hillsborough County alone, spending about $131 million. according to MLS data. The company seems to be much less active in Pinellas County, with only two homes listed in Pinellas County Property Appraiser records.

Other big buyers nationwide and in the Bay area include Malibu, Calif.-based American Homes 4 Rent, which has purchased at least 383 in Hillsborough County for $66 million and Fundamental REO of New York, which has purchased at least 128 for about $20 million.

The firms are buying through almost any means they can, directly from banks and Fannie Mae, through foreclosure auctions, short sales and through local real estate brokers who've listed properties on the Multiple Listing Service.

Talk of the next real estate bubble in the rental market is rampant.

Overall, large investors are buying a fairly small percentage of single-family homes, according to a foreclosure research and sales firm called RealtyTrac. These firms bought only about 9 percent of the single-family homes on the market in the Tampa Bay area in the first quarter of this year, RealtyTrac said, but it's enough that real estate agents are getting multiple bids on many homes.

One large investment firm sent Rae Catanese, a Tampa Realtor, an email solicitation asking for a chance to bid on her clients' homes before they were listed for sale publicly. She balked at the offer.

"I feel it is unethical not to advertise my seller's home on the open market," she told the Tribune. "My job is to get the highest and best offer, and that means advertising and marketing the home."

Young families and singles looking for starter homes are especially frustrated by having to bid against multiple investor groups flashing cash. That includes hedge funds with billions to spend and smaller mom-and-pop investors. Invitation Homes' sweet spot, for example, is a 3-bedroom, 2-bathroom home with a front and back yard, a carport or garage and a price around $150,000, Ridgway said.

Cash, 27, is hoping to move out of his parents' Tampa home, but keeps losing out to investors. He recently looked at a townhome on the market for $130,000, and knowing the market was tight, bid $135,000 to be proactive. He discovered the next day an investor had snapped it up for cash, although it wasn't clear if it was a large hedge fund or a small local investor. Cash most recently bid $129,000 for another townhome in the Town 'n Country area the same day he saw it.

A mortgage broker himself, Cash said the economy needs homebuyers who actually want to live in the homes, not just investors.

"Their goal is to make money for their shareholders," Cash said. "I have all my ducks in a row, but haven't been able to execute."

In fact, some property data and anecdotes from local real estate and title insurance agents suggest the hedge funds, too, are starting to struggle to fill their need for homes.

Most investment firms don't buy townhomes, real estate agents say, because they prefer easy-to-rent single-family homes. However, Tampa real estate broker Dale Hunter is noticing big investors snapping up townhomes lately, including one firm that bought up a $300,000 townhome in Tampa.

Meantime, investors seems to be dropping more cash per home lately. That's partly because prices are rising generally, up about 14 percent in the Tampa Bay area over the past year, Florida Realtors figures show.

However, brokers are noticing investors buying bigger, fancier homes in more expensive neighborhoods, too.

Brad Monroe, a broker with Prudential Tropical Realty, said his firm works with at least one major hedge fund buying homes in the area, which he wasn't authorized to name. It previously would spend up to $225,000 on a home, but recently started buying homes up to $300,000 because of a shortage of midpriced houses, Monroe said.

Multiple Listing Service statistics show Blackstone Group and Fundamental REO, a New York firm started by a former Goldman Sachs banker, rarely went above $200,000 when they started buying in Hillsborough County last year. But in recent months, about a quarter to a third of their purchases have been above $200,000, with a few dozen over $300,000.

Invitation Homes' Ridgway wasn't familiar with his company's home purchases in Hillsborough County specifically, but said there has been no strategic effort to buy bigger, pricier homes. Invitation Homes' average purchase is still around $150,000 nationwide, he said. A spokesman for Fundamental REO declined comment.

Some local real estate professionals, watching closely as investors spend more and get more aggressive in their house hunting, wonder how long the buying can last.

A big question is just how deep the Tampa Bay area's market for rental homes is, especially for the $200,000-plus homes hitting the rental market.

David Kirschner has been renting out single-family homes in Carrollwood and southern Pasco County for decades and wonders that, too.

Rental homes in the area fetch about 70 cents to 80 cents per square foot, so a typical 1,500 square foot home might rent for at least $1,050, Kirschner said.

MLS records indicate Blackstone Group has bought at least 49 houses with 3,000 square feet or more of living space, a size that normally would command more than $2,000 a month. Renting those out for more than $2,000 a month might start testing the area's limits.

http://www.cashhomesva.com/