Foreclosure-to-Rent Business Slowing in Miami-Dade, elsewhere

It was just a handful of months ago that investors were clamoring to climb aboard the foreclosure-to-rent business, steered primarily by firms like Blackstone Group and American Homes 4 Rent. halloweenhouse.jpg

These companies are in the business of buying up thousands of single-family foreclosures across the country on a monthly basis, only to turn around and rent out those same homes, in many cases to the previous owners. This not only gave banks an incentive to press forward on foreclosures, rather than home loan modifications (because they knew there would be a buyer standing at the ready), but it also effectively shut out many first-time home buyers, who couldn’t afford to compete with offers of outright cash.

Still, business seemed to pushing full-steam ahead, with Blackstone spending some $2.5 billion just in 2012 to buy up some 16,000 homes, bringing its total rental property business to about 200,000. Other companies joined the fray.

However, our Miami foreclosure defense attorneys understand that business has slowed significantly in recent months. It’s too early to say, though, whether the stagnation will be long-term.

In the Tampa Bay area, which like Miami had seen a significant number of foreclosures following the housing market bust, spending by the top three foreclosure-to-rental property businesses dipped by 50 percent over the course of six months last year. Blackstone’s rental offerings dropped by nearly 8 percent from October 2013 to January 2014, with more and more of those vacant properties failing to hold their weight.

Part of the issue for these firms is that housing prices are on the rise. They have increased nearly 25 percent since their low in March 2012. Not coincidentally, this was around the same time that these corporate home buyers started getting into the game.

Homeowners (particularly those underwater) benefit from an increase in home prices. However, these corporate home buyers thrived on the market’s distress. Now, there are fewer actual properties for sale at rock bottom prices.

In some ways, this outcome was inevitable. The more foreclosures bought by corporate buyers, the less available, and the higher the demand as home prices began to climb.

But that doesn’t mean these companies are giving up.

Some have turned to directly purchasing the rights to “non-preforming” or distressed loans. In all, these firms have snapped up some 2.2 million loans, many of which have since gone into foreclosure, meaning that the companies can still gain access to those properties at 56 percent to 80 percent off the rightful property values.

Homeowners are still losing out.

Meanwhile, American Homes 4 Rent and another firm, Colony American Homes, are the second- and third-largest single-family landlords.

This has led to dozens of neighborhood advocacy groups appealing to federal regulators to address some of the inherent problems. Those issues include not only the outbidding of first-time home-buyers, but also tenants being displaced and communities undergoing dramatic changes as a result of these properties being managed not by locals but by large, outside firms.

Regulators have yet to respond.

If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.

Additional Resources:
Blackstone’s Home Buying Binge Ends as Prices Surge: Mortgages, March 14, 2014, By John Gittelsohn and Heather Perlberg, Bloomberg
The Foreclosure-to-Rental Business Shows Signs of Wear and Tear, March 1, 2014, By Amanda Alix, The Motley Fool
More Blog Entries:
Rental Securities Investments Reminiscent of Pre-Crash Practices, Feb. 24, 2014, Miami Foreclosure Lawyer Blog