According to a recent story published in the Chicago Tribune, a number of Wall Street institutional investors have begun purchasing thousands of Chicago’s foreclosed single-family homes, which are then rehabbed and sold or rented out. According to the story, such real estate activity by seasoned investors signals some important trends in the housing market: housing values are increasing, and more Americans are trading in home ownership in favor of renting.
Experts contend that the buying increase from such investors can be both a blessing and a curse. On the one hand, the housing market can’t fully recover from the financial crisis which began in 2008, until the massive number of foreclosed homes across the country are repurchased. As this blog has discussed before, until recently, Chicago has been fighting a losing battle with the ever-increasing number foreclosures. According to realtytrac.com, one in every 528 properties in Illinois is currently in foreclosure. Through the first half of 2013, Illinois posted the nation’s third highest foreclosure rate: 1.20% of housing units with a foreclosure filing.
Eight national investment firms have acquired approximately 3,200 houses in the Chicago area over the first nine months of 2013. Many of these large firms operate under names such as Waypoint Homes, American Homes 4 Rent, Hyperion Homes, BLT Homes and Invitation Homes.
Invitation Homes, run by The Blackstone Group L.P., a New York-based investment banking and financial services corporation, is purportedly purchasing over $100 million of houses a week across the country. In November alone, Blackstone sold $479 million in bonds that were backed by some of the more than 40,000 homes across 14 markets, including 2,500 in the Chicago area, Blackstone has bought.
According to Jonathan Gray, the global head of real estate for Blackstone, “There’s underlying demand from people who don’t necessarily have the money for a deposit and want their kids in a good school.” Although there was initially some concern that investment firms couldn’t turn a profit purchasing and renting homes, critics have been silenced by companies that have been able to rent over 90 percent of properties within six months of bringing them to market.
Harvard sociology professor Matthew Desmond, has voiced some concern over what he calls the “Wal-Martization of urban housing.” According to Desmond, “More and more prices are going to be set by really high-tech algorithms. What happens when you fall behind? If your landlord is your next-door neighbor, you can go to them and say, ‘Charles, you know I’m good for it. Can we make an arrangement?’ If you’re a property management company and you own 2,500 units, and someone falls behind in rent, form letters go out. You don’t even know who’s throwing you out.”
Until recently, this blog had opined that Chicago was fighting a losing battle with real estate foreclosures. It would appear, however, that, due to the actions of these big investment firms, the number of Chicago foreclosures may he headed for a turnaround. If you have questions regarding the rights and obligations you have as a tenant or property owner in Chicago, contact the experienced real estate attorneys at The Slater Firm, Ltd. today.