Buy-to-Rent Booms, Rent-backed Securities Debated As Treasury Rates Jumps 16 Basis Points

Confounded Interest ^ | 08/01/2013 | Anthony B. Sanders

[whitedog57]

There is a lot happening in the world of housing and mortgage financing.

First, there is the buy-to-rent boom. Wall Street firms are diving headfirst into purchasing housing in order to rent them to households.

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Morgan Stanley predicts that the buy-to-rent sector will grow from $17 billion now to $100 billion over the next several years.

And we are seeing two major Wall Street firms entering detailed discussions to create and sell the world’s first bond backed by home-rental payments, people familiar with the matter say.

Rent-backed securities? RnBS? Blackstone, a leader in the single-family rental market, seems to think it is a good idea.

Booming buy-to-rent? Rent-backed securities? What the heck is going on?

First, the national homeownership rate has plunged to 65%, last seen in September 1995.

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Second, mortgage purchase applications are stuck in the Zona de Muerte (zone of death) back at 1996 levels.

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Why?

Third, real GDP growth is experiencing a steady slow down.

Long-Term Real GDP Growth

Resulting in …

Fourth, real household median income growth is negative.

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Fifth, today the US Treasury 10 year yield jumped over 10 basis points which will likely cause mortgage rates to rise. Mortgage purchase applications have been dropping since May 1st as mortgage rates rose.

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Sixth, while initial jobless claims improved to “Reagan Recovery” levels of Q1 1994, the real GDP growth in the US is only 20% of the real GDP growth. It is hard to ignite a homeownership boom with 1.7% Real GDP growth.

There are other reasons as well, such as declining labor force participation and employment-to-population ratio.

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The buy-to-rent trend will continue, at least until households get back into the game.

And with today’s jump in the US Treasury 10 year rate (16 basis points, mortgage rates will follow.

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[whitedog57]

Clever. Gov't promote home ownership, a bubble is created, then Wall Street gets the homes.

[Tanniker Smith]

Rent is significantly lower than mortgage. People without a clue (or a care?) about equity rush in for the bargain. Could work.

And it isn't rent-controlled. Yet.

[EQAndyBuzz]

This will not end well......

Again..

[Wolfie]

This will not end well...... Again..

It ended quite well the first time, at least for the people who are doing this. Again.

[The Working Man]

I see a BIG BOOM in section 8 housing, And I think big business sees a winner in buying homes to rent to Section * for a guaranteed rent check each month.

Just wait until the get the fix-up bills unless they plan on sticking HUD with them or getting a big Business write-off as an expense.

[montag813]

I see a BIG BOOM in section 8 housing, And I think big business sees a winner in buying homes to rent to Section * for a guaranteed rent check each month.

If Hillary gets 8 years, we are done. As in no return.