On April 23, 2013, Louise Hartmann writes on the Thom Hartmann Program blog:
The banksters are cashing in off their own disaster. The big banks are buying up distressed real estate by the boat load, and renting or selling it back to the public for huge profits. And, in addition to making it even more difficult for economically-strapped Americans to become home owners, the banksters are increasing the likelihood of another Wall Street-fueled bubble that could crash our economy.
According to the Washington Post, institutional investors account for as much as 70 percent of sales in some markets, and their purchases are increasing home prices in those areas. Some investors are bidding on as many as 200 homes in a single day, crowding out individual buyers, re-inflating prices, and taking on a huge volume of inventory that can’t be liquidized quickly if and when big banks get into financial trouble.
Because of the risky trading practices and sub-prime mortgage scandals of the big banks, the taxpayers were forced to spend 700 billion dollars bailing out the banksters. Now, they are putting our economy at risk again, and they’re making huge profits off of the homes they foreclosed on. And, taxpayers could be left holding the bag, when the big banks get into trouble again.
In this case, “banksters,” hedge funds, and individual investors are basically engaged in “flipping” houses––the process of buying at down market prices, waiting while renting at premium rents, then selling after the market prices have jumped. These are generally cash transactions, which tend to be favored by sellers because of the assurance of the sale, even though they may have gotten higher offers from people who actually intend to live in the houses but who need approved “consumer” loans to purchase. Such mortgaged loans require a separate source of income. Given the limited supply market conditions they are able to control long term the market pricing of houses and reap greater profits from higher sale prices. This scenario is creating a competition between the average homeowner seeker wanting a place to live and raise a family and the for-profit investors who want to maximize their return on “flipping.” Effectively, poor families are priced out of the market and cannot buy their own homes, and thus are losing out one of the most regarded cornerstones of opportunity in America. Instead, increasingly more people are being forced to rent and thus subject to rent increases and perpetual consumer debt over time rather than a fixed mortgage cost, which builds equity overtime, which results in greater wealth.
http://www.thomhartmann.com/blog/2013/04/banksters-are-cashing-mortgage-meltdown
