from Wolf Street:
The US housing market has become a special creature. The government subsidizes it in a myriad ways, and more than ever. The Fed has repressed interest rates to ludicrous levels. This has given Wall Street a great opportunity to borrow hundreds of billions of dollars to buy up single-family homes and rent them out. Thus, PE firms have become the deep-pocket force at the lower end of the market. They’ve driven up prices and have become the largest landlords in the US. And they’re now selling a new kind of synthetic structured security – one backed by these rents.
Central banks in other countries have also created enormous credit bubbles, particularly in China, and those that benefited from it have been trying hard to take their money out of harm’s way, beyond the reach of their government, and invest it elsewhere, including in US homes. These folks have emerged as deep-pocket buyers at the upper end of the market.
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