Hedge Funds

Investors of all sizes played a singular role in the national nightmare known as the Housing Depression. They soaked up toxic inventories of damaged and discounted distressed properties, repaired them and converted them into rentals to house families that had lost their homes or to replenish depleted inventories for entry level buyers. When the history of the past six years is written, we may realize that the recovery that housing is now enjoying would not be taking place as soon as it is without investors.

Now rumors have been flying for months that the largest investors have turned this equation upside down and instead of relieving pressures on housing markets, they may be making conditions worse.

At a time when there is an extraordinary shortage of listings and prices are soaring in many of the markets where Institutional investors—hedge funds and REITS—are active, then buying and warehousing and bidding up prices in the markets they have selected. (See Tracking the Hedge Fund Big Dogs: Prices and Plots).

Now there are reports that hedge funds are buying quantities of full-price homes right off the MLS at inflationary prices that are reducing tight inventories even further and igniting markets that are already hot. If true, the result could be highly volatile markets as values soar above levels that local income levels can sustain

They are rumors no longer. One of Florida’s best known housing economists, Jack McCabe, has spent months getting to the bottom of the hedge find phenomenon as if affects Florida and the rest of the nation. In this exclusive interview for BiggerPockets.com, McCabe shared his findings.

Over the past year, he examined thousands of closed, recorded cash sales to business organization named buyers (i.e. LLC, LP, Inc.) in South Florida, Tampa, Phoenix, Las Vegas, San …read more