So Who is the Dumb Money Ruining the Rental Housing Market?

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So Who is the Dumb Money Ruining the Rental Housing Market?

The head of Carrington, which is known as an established distressed debt investor, a servicer that has been a target of litigation, and more recently, an early entrant in the single family home rental business, said this week it was no longer buying houses for lease because dumb money had ruined the market. From Bloomberg:

“We just don’t see the returns there that are adequate to incentivize us to continue to invest,” Rose, 55, chief executive officer of Carrington Holding Co. LLC, said in an interview at his Aliso Viejo, California office. “There’s a lot of — bluntly — stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.”

The degree to which the housing “recovery” has been driven by speculators isn’t fully appreciated. Reuters tried to pin down a number, but they apparently did it by identifying specific private equity firms and tying them to purchases. They came up with “at least 10%” in Las Vegas, suggesting that was representative for the most distressed markets.

But while it’s hard to get good data in such a fragmented field, that estimate is likely to be markedly too low. Some sources have said that cash buyers have accounted for as much as 50% of the activity in the hottest states, and those would also have a bigger impact in the national estimates of home price appreciation.

Rest here…

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