Tag Archives: Rent to Own

Pandemic is Pushing Wall Street Suburbs and Home Garden Space

New Orleans        Rumor or reality?  I wasn’t sure.  My daughter had heard from a real estate agent who specializes in New Orleans historic districts like the French Quarter, Marigny, Bywater, and elsewhere that, contrary to nationwide home sale collapses of 50% during the pandemic, sales were booming in the Quarter.  I found that hard to believe.  Maybe just a one-off thing for that particular agent or your usual hawker hype or something.  What was more interesting to me is that she reported that sales were driven by people leaving the Quarter with its tight spaces and brick patios for anyplace they could find, like Bywater or even farther out, where they could have a garden. Grocery store shortages and health risks were spurring a weird reactive small food sustainability movement, it seemed.

Darned if vulture capitalism as practiced by REITs and Wall Street equity funds didn’t find themselves on the right side of a lucky coin toss, even as we have noted that they have dominated and eviscerated the rental markets in cities all around the country from Atlanta to Memphis to Phoenix.  Remember, these fast operators, led by Blackstone Group, swooped in and bought hundreds of thousands of foreclosed homes from Fannie and Freddie in nearby suburbs so that they could apply a coat of paint and make them rentals, sometimes to the former owners.  Invitation Homes, the creature from the Blackstone lagoon, was spun off for billions, but is still the biggest operator in this space with more than 200,000 properties.  American Homes 4 Rent is another big player with over 50,000 homes.  According to the Wall Street Journal, after they took early hits in the stock market on expectation of rental defaults at the beginning of the pandemic, they have now surged forward, partially riding the same tide that might be rippling from the urban core, as noted in New Orleans.

Families are trying to move to the suburbs because of health concerns and in order to get more space for themselves and children to cope with stay-at-home orders now and to come.  These families are also moving to rent as mortgage markets and general financial concerns make buying during this depression harder to contemplate, despite low interest rates.

Not on the short list from Wall Street, but I bet on the minds of families as well is something of a modern day “back to the land” movement, as least as far as suburbs located near urban centers are concerned.   Small gardens and food security are on the list.  I’ll bet more of them are like my uncle in Kansas City and want the space to have what he calls a Costco-room, where he stores all of his bulk purchases.  No danger with a Costco-room of ever running out of toilet paper!

This new “prepper” sensibility might be a movement.  It’s a shame Wall Street is reaping many of the rewards, but a pandemic makes all of us something of a prepper.  The zombie apocalypse might be fiction, but in fact, it now seems like we are in it.

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The Census and Contracts-for-Deed

Little Rock       One somewhat nagging problem the ACORN Home Savers Campaign has confronted over the last several years, especially when we looked at the frequency of “contracts-for-deed” was the lack of definitive data.  Sure, we knew in Detroit that more contracts-for-deed were being registered under real estate transfers in recent years than were any form of traditional mortgages, but such information was local, not uniform, and decidedly not national.  For some inexplicable reason during the aftermath of the Great Recession in 2008, the Census Bureau under President Obama dropped the question from the 2010 census creating a black hole on a gnawing problem.  We can guess why, but we don’t know definitively.

My comrade and friend, the filmmaker Charles Koppelman, joined ACORN’s “volunteer army” when we were hitting the doors in Pittsburgh in the spring of 2017 trying to get to the heart of these issues with the Home Savers Campaign.  He had his camera rolling when a local Pittsburgh ANEW member and I were visiting with a woman, as she lay on her couch recovering from back surgery, in her home.  At first, she said she didn’t have a contract-for-deed, but the more we talked the clearer in became that she had a 30-year contract with a subsidiary of Harbour Portfolio, that was absolutely a contract-for-deed.  The interest rate was 12%.  The terms were onerous.  The contract was precarious.  If she missed a payment, they could take back the house, and she would lose everything.  Harbour, a Dallas-based hedge fund, had flaunted the fact that it was using such contracts to flip thousands of properties it had acquired at foreclosed property auctions conducted by Fannie Mae and Freddie Mac.  She was ready to organize with the campaign once she got back on her feet.  Charles learned more in talking to us about the situation so knew the information gap created by the Census that was preventing a full understanding of how widespread the return of such contracts might be.

Charles lives in the Bay Area of California.  He sent me a screen shot of something very interesting yesterday.  He had received a Census form to fill out in the mail, and darned if it didn’t have a question – once again – asking whether the household was under a contract-for-deed.  Voila!   Some bureaucrat deep in the bowels of the Census Bureau must have seen the smoke signals about the fact that this often-predatory product is back, and slipped the question back into the queue.

It will help, but it’s no panacea of course.  The visit in Pittsburgh 18 months ago provides that answer.  Too often given the desperation that pushes many families into these kinds of agreements as they search for affordable housing in almost any condition also leaves them uncertain of the details, including what to call the agreements they have signed.  The brokers are often very loose lipped in the way they encourage people to see such agreements as mortgages.  Others agreements that are only different in degree, like Lease-Purchase-Options, Rent-to-Own, Lease-to-Own, etc, etc, aren’t contracts-for-deed that are now actually monitored by Dodd-Frank but should earn a “check” in that Census box as well.

The data won’t be perfect by a long shot, but magically we are somehow back to where we were in 2000 when the numbers were last counted, so on the 2020 Census the inclusion of the contracts-for-deed question is at least something to put in the good news column.

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