As 2013 swiftly slips away from us, US housing, and somewhat equities continue to drive economic growth in the world’s largest economy. The US housing market has become overrun by major investment firms, in what could be damaging to the US consumer as house prices continue to rise before the majority of the population is in a position to once again recover from foreclosure.
Foreclosed homes in particular, are selling at an alarming increase to previous prices in 2011 and even more recently in 2012, with a focus on accumulation of assets being the major focus for hedge funds across the board imposing aggressive targets of buying homes, maintaining strict quotas of millions of houses to create an eventual derivative based trading product. With such high vacancy rates and a depressed housing market, why are America’s largest institutions driving the recovery in housing rather than the consumer? Its a numbers game and its all speculative of a cyclical US housing recovery. This doesn’t just relate to housing, but also stocks and eventually currency as the fundamental growth of the economy usually begins with the housing market. If you continue to buy homes as soon as they hit the market, even in less desirable areas, the scarcity equation begins to take form, as available inventory becomes scarce, the 3 million homes you already own are certainly going to go up in value. The sheer volume of homes under any major fund’s control now means they can bundle these assets, rate them in a class based system which is already in use, and almost hide those non-performing ‘lemons’, whilst taking advantage of increased capital values in homes across the board. Already, such a class based system is already in play across America. What will they end up with? Bundles of homes, similar to the so called ‘rated’ mortgage backed securities market which lead to the implosion of the Global Financial Crisis. Packages of homes, their values traded on the derivatives market, littered with A, B, C and D class investments, simply re-categorized as the market returns and their values are no longer tied to the physical asset itself.
Its a feeding frenzy of investment funds and it may just be one of the largest driving forces of the US economic recovery. Still, its not set to slow down any time soon as major funds aim for the skies, with the intention to buy more than 5 million homes in the coming year. This will not only drive the housing recovery, but housing related stocks, US bested ETF’s (Exchange Traded Funds) and the overall economy.
It’s looking like another positive year for America so stay tuned….
Stay ahead Of The Game,