Some claim that real estate is recovering. Wages are stagnating, unemployment is still high, credit hard to get, and income inequality worst than it has been since the Great Depression. Yet, sales are up.

A recent report (1) says that foreclosure sales and short sales accounted for 43 percent of 947,995 homes sold last year in the nation. These homes are sold at massive discounts, which would seem like a good thing for potential home owners. However, individual families aren’t buying up these homes; Wall Street investors are scooping them up, often right on courthouse steps. In 2011, 27 percent of all home purchases were made by such investors (2). The numbers for 2012 haven’t been tallied yet, but look to Advertisement

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Wall Street has already raised $10 billion for real-estate owned properties (REOs). Hedge fund Blackstone announced last November that it would spend $100 million a week on such endeavors (2). And why are investment firms buying up all these homes? To rent to you. Often, the first renters are those that just had their home bought out from under them.

But the most frightening element of all this is the move by these billionaires and bankers to securitize rental revenues. This is exactly what transpired prior to 2007, except it was securitized mortgages. Wall Street has turned its hungry eyes from home-buyers to home-renters.

We saw what this did to home prices. What will it do to home rental rates?

(1) www.realtytrac.com/

(2) www.newrepublic.com/article/112395/wall-street-hedge-funds-buy-rental-properties/

Forest Rhodes