From Main Street to Wall Street: How Big Investors are Changing the Housing Market

In recent months we’ve seen an increase in housing prices and home sales, but what or whom is responsible for this growth? Well if you’re looking to sell a home, you can thank the mega-investment firms on Wall Street.

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Over the past year, large investors such as the Blackstone Group and Colony Capital have been spending billions of dollars buying houses in some of the worst real estate markets in the US. Blackstone, one of the largest investors competing for properties, has accumulated over 26,000 homes throughout 9 different states. Similarly, Colony Capital has been spending roughly $250 million a month in order to accrue more than 10,000 homes.

Although these large investment firms have avoided healthy markets, they have dominated the markets in less fortunate areas. According to Campbell HousingPulse, a survey tracking over 3,000 agents and brokers nationwide, 68% of the damaged homes sold in the month of April were purchased by these large investors.

As of now, most of these mega-firms are planning on renting out the properties they’ve purchased – at least until they can make a larger profit once housing prices increase further – which has left critics with assorted feelings.

Some professionals, such as Joe Cusumano, believe that this could hurt the neighborhoods and markets which these properties are a part of. Cusumano, an agent in Riverside County, reported that recently 90% of his business has been with these large investment firms, which has lead to 15% increase in property value. He has a couple concerns about this new business though. One major concern is that these firms are located too far away, and will not invest the time or money into proper upkeep. An even bigger concern is that with home values growing so rapidly, the market could eventually stall and crash as it has before.

On the other hand, some experts believe this could lead to the end of the housing crisis. Many of the homes being purchased are ones which homeowners are unable or unwilling to buy. David Bragg, an analyst at Green Street Advisors, believes that these buying strategies could one day be “seen to have helped put the floor under the housing market”, allowing for the recovery of many desperate real estate markets.

Either way, it’s hard to predict exactly how these dramatic changes will influence the market in upcoming months and years, but it could be taking inventory away for your buyers in the short term.

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  • Rolph Schiffe

    I’ve seen some listings going to large investors like this, but nothing like what Mr. Cusumano is experiencing. With so much buying, I’m concerned that these investors will all decide to sell once prices rise enough, making it much more difficult for a normal homeowner to sell their property