What Is Driving The Market

What Is Driving The Market

Warren Buffett followed up his famous statement of Feb 2012, "I'd buy up a couple hundred thousand single family homes if I could" by buying up real estate brokerages around the country. He has even partnered with Brookfield Asset Management to
double the size of his brokerage business creating Berkshire's Home Services of America. He seems financially committed to a US housing recovery!

Several large investment firms have literally followed his comments and "Barclay's calculates that $5.4 Billion of institutional capital has been spent on Buy-to-Let single family housing in the USA and estimates another $8 Billion could be spent in
the next couple of years” (Financial Times, London, Friday, Feb. 15, 2013)

This is massive institutional investment in what is effectively a new asset
class for them. "Blackstone alone has invested $3 Billion into 17,000 homes in the 'sunbelt states' of California, Nevada, Arizona and Florida over the past 12 months" said Jonathan Gray, the company's global head of real estate. The company has dedicated nearly one thousand workers and sub- contractors to this task across the country.

This stimulated a massive increase in demand in the market segment targeted by these funds. In Vegas, the target market is well located SFR's (Single Family Residences) with a minimum 3 bedrooms, 2 baths, 2 car garage, up to $250,000. 

Desired ROI's were 8% but seem to have fallen to as low as 5%. This market segment has risen 30% - 45% in the past 12 months:
Typical 1400 SF, 3 bedroom, 2 bath, 2 car garage, increased from $100,000 to $145,000 between March 2012 - March 2013. Typical 2300 SF, 4 bedroom, 3 bath, 3 car garage and pool increased from $175,000 to $225,000 between March 2012 - March 2013.

AMAZINGLY, these prices are STILL BELOW

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Phone: 702-751-7071
Dated: July 24th 2013
Views: 5,451
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