A wave of consolidation in the REO-to-rental business has hedge funds selling bulk portfolios. Will this impact the housing market? In early 2012, the REO-to-rental business model was projected to be a $100 billion industry. These investors provided a significant boost to housing demand in 2012 and 2013, but the activity of these funds abruptly stopped in 2014 because prices became too high to meet their return thresholds. Last July, a local housing market analyst sounded the alarm that institutional buying was an unstoppable Juggernaut destined to cause problems. I thought his concerns were baseless because these investors would turn off the money spigot as easily as they turned it on (See: Investor activity to plummet, home sales volumes will…[READ MORE]

Builders are responding to the lack of inventory and higher prices by building homes in areas where we really don't need them. Builders will construct new homes anywhere they see an opportunity to make money. They are starting to build homes again in the high desert of California where only a few short years ago, they massively overbuilt houses we didn't need in response to the false price signal from the housing bubble. Now, with lenders restricting inventory in an effort to reflate the bubble, builders once again see an opportunity to make money by building homes where we don't need them. Is this what the federal reserve and politicians thinks is best for the economy? They wanted to force…[READ MORE]

The lack of first-time homebuyers purchasing homes and gaining equity over the last six years is weakening the move-up market. Over the last two years, the move-up market has shown more strength relative to the lower market tiers because move-up buyers who didn't HELOC themselves to oblivion are the only ones with the good credit and down payment necessary to close the deal. The reflation of the housing bubble from 2012 to mid 2013 restored some equity to homeowners and allowed a few to execute move-up trades; however, this effect appears to be petering out, and the move-up market is weakening. Back in early 2013, I wrote that the move-up market would suffer for a decade due to the lack…[READ MORE]