Hedge Funds are Changing the Market

Hedge Funds are Changing the Market

How are they changing yours?

You may have noticed a recent increase in house sales. It’s being felt all across the country. So, what/who’s responsible?

  • Low interest rates?
  • Banks are lending again (though more conservatively than in the past)?
  • Warren Buffet said that single family homes are a great place to invest (currently)?

Nationally, one of the biggest contributing factors to the rise in house prices and increased sales is the move of Hedge Funds into the housing market. According to Radar Logic, these institutional investors purchased about 12 percent of the new homes sold through March. This may not sound like a lot, but if you take them out the the house purchase equation, home purchases actually declined over the past year.

They come into an area and buy up properties which drives up prices. Problem is, if another market seems better, they can jump there and leave where they currently are, meaning what’s going on in a particular market may not be stable.

Here in our local Greensboro market, we had our first hedge fund land in March. What we know for sure is that they’re buying retail properties, are paying 92-96% of market value for them, and are willing to add another $10,000 in repairs. They then hire a property manager to put in a tenant and oversee the property.

At this point, it doesn’t appear that they have any property management experience and we know the local person they hired to handle some of their properties. She has never done property management in the past. Interesting.

But, they have purchased several of our properties recently and, at 95% of market value, we may have found the silver lining. We’re currently doing fix and flips – these hedge funds are buying properties that are already renovated. Seems like the perfect marriage.

How are hedge funds affecting your market and your business?





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