Giant private-equity firms, backed by public worker pensions and other investors, are buying thousands of American homes so they can rent them to people who can't afford their own mortgages. They hope to exploit low interest rates and home prices, but it's possible that all their buying is already starting to drive prices back up, reports Bloomberg here.
"Blackstone Group LP, the largest U.S. private real estate owner, accelerated purchases of single- family homes as prices jumped faster than it expected." Blackstone manages billions in real estate investments for the Pennsylvania state pension funds and many other institutional investors.
"Blackstone has spent more than $2.5 billion on 16,000 homes to manage as rentals, deploying capital from the $13.3 billion fund it raised last year, said Jonathan Gray, global head of real estate for the world’s largest private equity firm.
"That’s up from $1 billion of homes owned in October, when Blackstone Chairman Stephen Schwarzman said the company was spending $100 million a week on houses...
"Blackstone is the largest investor in single-family homes to manage as rentals, acquiring properties in nine markets, from Miami to Phoenix, where prices surged 22 percent in the 12 months through October. The firm, along with Thomas Barrack’s Colony Capital LLC and Two Harbors Investment Corp., is seeking to transform a market dominated by small investors into a new institutional asset class that JPMorgan Chase & Co. estimates could be worth as much as $1.5 trillion."