Changes From the Market Crash of 2008

Sideline Money – Americans are not so quick to jump into the stock market. Millionaires now place a higher priority on growth than wealth preservation, which is a reversal from last year. 16% plan to invest disposable income in the next few months and 40% expect to invest over the next two years.(1) Many are looking for tangible assets to combat the falling dollar and potential inflation.

One Trillion Dollars – Can pay for every renter in the USA for 3 years or the mortgage for every US homeowner for 14 months. It could repurchase every home foreclosed in 2007 and 2008.(2)

Housing Inventory – The housing inventory glut is over for now.(3)

  • January 2004 – $2.35 Million
  • August 2008 – $4 Million
  • August 2012 – $2.45 Million
  • January 2013 – $1.7 Million

Inventory Placement – Hedge funds have learned from savvy investors that tangible assets, such as real estate, are what make sense. Maggie Polisano, CamaPlan company manager, says, “IRA and retirement funds are continuing to increase market share in the real estate market.” Companies such as The Blackstone Group, Carrington, SilverBay and Tricon have adapted to the times and are purchasing “income producing” properties on a mass scale. Hedge funds control approximately 77,000 single family homes(4). “Individual investors are finding it harder to find inventory,” says Stephanie Pappas, President of Diversified Investors Group in Philadelphia, PA. FHA-foreclosed property inventory is down 47% and foreclosed properties are less than than 30% of inventory. REO inventory is down 18% nationally, with dramatic decreases in Nevada, Florida, Arizona and California.(2)

Housing Prices – Housing prices have increased 10.5% in the past 12 months(5). Interest rates remain low and anxious money continues to find its way into the market through individual investors and the Wall Street hedge funds.

Delinquent Mortgages – There are $10 million delinquent mortgages in the US(2). However, out of these non-performing notes, 40% will be modified, 40% will result in a “deed in lieu” and 20% will result in foreclosure(2). Self-directed IRA purchases have definitely increased in the delinquent note asset class, whether buying individual notes or being a part of a bigger fund that buys in bulk.

Summary – Housing prices will continue to rise in the short term. However, the hedge funds are expecting the prices to increase as the dollar decreases. This may be setting up another bubble for the future, when they plan on selling them around 2018. In addition, they are not quite set up to fix and rent the properties they are purchasing.

Companies such as NoteSchool and Payments for Partner Relief are efficient at modifying non-performing notes and keeping individuals in their homes, something the banks have failed at terribly, thus reducing additional foreclosures. Both of these approaches may provide for a soft landing in the hard-hit real estate market and help the construction industry with new home starts. This scenario unfolded over the past few years and is a testament to the entrepreneurs that developed and pioneered the steps to the “new normal”.


(1)   May 27, 2013, USA Today, US Trust Survey

(2)   NaReia Conference, Pittsburgh, PA, Eddie Speed presentation June, 2013

(3)   NAR, Housetracker, Calculated Risk

(4)   Reuters and ZeroHedge, Bloomberg 2013

(5)   Core logic HPI Report 3 2013