This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.nytimes.com/2014/03/18/world/americas/rethinking-homes-and-their-city-role.html

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
Rethinking Homes and Their City Role Rethinking Homes and Their City Role
(6 months later)
Remember when big investors claimed to be on the American homeowner’s side? By funding securities derived from diced-up mortgages, they argued, they pumped money into the markets and financed dreams. Well, that went well. Now, as the housing market recovers from the crisis they helped to cause, some of these investors are back in the game — except this time, they’re not financing home buyers. They are bidding against them.Remember when big investors claimed to be on the American homeowner’s side? By funding securities derived from diced-up mortgages, they argued, they pumped money into the markets and financed dreams. Well, that went well. Now, as the housing market recovers from the crisis they helped to cause, some of these investors are back in the game — except this time, they’re not financing home buyers. They are bidding against them.
From coast to coast, private equity firms, hedge funds and other institutional investors are snapping up houses — the kind that people actually live in, as opposed to swaps of bundles of slivers of mortgages. A broker in Brooklyn estimated not long ago that 70 percent of local home purchases were by such investors. In a research note last week, Bank of America Merrill Lynch warned that while “home prices have surged,” a “historically low” share of sales were to first-time buyers.From coast to coast, private equity firms, hedge funds and other institutional investors are snapping up houses — the kind that people actually live in, as opposed to swaps of bundles of slivers of mortgages. A broker in Brooklyn estimated not long ago that 70 percent of local home purchases were by such investors. In a research note last week, Bank of America Merrill Lynch warned that while “home prices have surged,” a “historically low” share of sales were to first-time buyers.
“The decline in first-time buying has been offset by an increase in demand by investors, including large private equity firms,” the bank said. “The concern is that demand from investors will fade this year but first-time home buyers won’t be prepared to take back market share as a result of tight credit and years of sluggish income growth.”“The decline in first-time buying has been offset by an increase in demand by investors, including large private equity firms,” the bank said. “The concern is that demand from investors will fade this year but first-time home buyers won’t be prepared to take back market share as a result of tight credit and years of sluggish income growth.”
From a buyer’s point of view, the economic history of the last decade reads a lot like this: First Wall Street tried to sell me loans I couldn’t afford. Then it refused to lend me money for what I could afford. Now it is bidding against me.From a buyer’s point of view, the economic history of the last decade reads a lot like this: First Wall Street tried to sell me loans I couldn’t afford. Then it refused to lend me money for what I could afford. Now it is bidding against me.
The investors’ binge is fueling anger in American cities. On the website Free Williamsburg, commenters recently bandied about ideas for keeping investors out of Brooklyn, one of the five boroughs of New York City. We could tax them, one suggested. Another proposed tagging investor-owned buildings to “let people know with graffiti and stamps who owns the place.” And there was this, from a user called Rivegauch610: “I would like to see the same fate befall repulsive beings like these as happened to the wealthy in Russia, ca. 1918.”The investors’ binge is fueling anger in American cities. On the website Free Williamsburg, commenters recently bandied about ideas for keeping investors out of Brooklyn, one of the five boroughs of New York City. We could tax them, one suggested. Another proposed tagging investor-owned buildings to “let people know with graffiti and stamps who owns the place.” And there was this, from a user called Rivegauch610: “I would like to see the same fate befall repulsive beings like these as happened to the wealthy in Russia, ca. 1918.”
The fear has to do partly with rising prices, and partly with the loss of character in what were once stable neighborhoods of family-owned homes. The growing role of investors — who often renovate the houses and rent them out — also seems to some to augur a return to the majority-renter society that America was before the New Deal and the coming of the Federal Housing Administration in 1934, with its 30-year, government-insured mortgages.The fear has to do partly with rising prices, and partly with the loss of character in what were once stable neighborhoods of family-owned homes. The growing role of investors — who often renovate the houses and rent them out — also seems to some to augur a return to the majority-renter society that America was before the New Deal and the coming of the Federal Housing Administration in 1934, with its 30-year, government-insured mortgages.
There is fear, in short, that homeownership will become once again a capstone of a fruitful life, not a steppingstone to one.There is fear, in short, that homeownership will become once again a capstone of a fruitful life, not a steppingstone to one.
Americans wishing to discover what they’re up against need go no further than Juwai.com, a Chinese website offering translated listings of investment properties, including in low-income American neighborhoods. A CNN report last year noted that Chinese buyers alone accounted for nearly one-fifth of all foreign investment in American homes; that they paid a median price of $425,000 for those homes, nearly double the national median; and that 70 percent paid cash.Americans wishing to discover what they’re up against need go no further than Juwai.com, a Chinese website offering translated listings of investment properties, including in low-income American neighborhoods. A CNN report last year noted that Chinese buyers alone accounted for nearly one-fifth of all foreign investment in American homes; that they paid a median price of $425,000 for those homes, nearly double the national median; and that 70 percent paid cash.
There is sincere disagreement about what to do about this problem — and about whether it is a problem to begin with. The elusiveness of owning seems to fit into the refrain that “average is over” among economic observers like Tyler Cowen: The idea that America is entering a new era in which there will be superstars and serfs and not many people in between them. Politicians regularly pledge to build more affordable housing. Others maintain that markets work and that rising prices will encourage new supply.There is sincere disagreement about what to do about this problem — and about whether it is a problem to begin with. The elusiveness of owning seems to fit into the refrain that “average is over” among economic observers like Tyler Cowen: The idea that America is entering a new era in which there will be superstars and serfs and not many people in between them. Politicians regularly pledge to build more affordable housing. Others maintain that markets work and that rising prices will encourage new supply.
But in cities, where prices are highest, more space isn’t easily made. A more radical approach, suggested by people like Enrique Peñalosa, a former mayor of Bogotá, Colombia, is to reimagine urban land as a kind of public utility. Such a vision holds land to be more like tap water than a classic commodity: bought by the state for use by residents, whether as rental apartments or parks. It is hard to imagine any city in this market-loving nation going that way. But it’s also getting harder to imagine regular people owning regular homes in the urban future that looms.But in cities, where prices are highest, more space isn’t easily made. A more radical approach, suggested by people like Enrique Peñalosa, a former mayor of Bogotá, Colombia, is to reimagine urban land as a kind of public utility. Such a vision holds land to be more like tap water than a classic commodity: bought by the state for use by residents, whether as rental apartments or parks. It is hard to imagine any city in this market-loving nation going that way. But it’s also getting harder to imagine regular people owning regular homes in the urban future that looms.
Join an online conversation at http://anand.ly and follow on Twitter.com/anandwrites Join an online conversation at http://anand.ly and follow on Twitter.com/anandwrites