Housing Recovery Caused by This?

A housing recovery may be underway, but the nature of this recovery differs from those of the past. While the investment pools referred to in this article may have put a floor under home values today, does this really constitute a true lasting recovery? Also, how can this "new" kind of recovery help a general economic turnaround as this author and many others claim? If their evidence for this claim is based on past housing recoveries, remember that those were driven by individuals who decided to buy houses, not huge investment pools created by Wall Street, whose principals have access to the ultra-cheap money the government, via the Fed, has made available to these elite players. This difference alone should give us pause before we compare this pick up in house buying with those of the past.

We're in uncharted waters here, and making too many assumptions could prove problematic. That's not to say that if you need a house to live in you may not find a reasonable bargain out there. Or if you're an investor who knows what they're doing - meaning how to evaluate whether your prospective purchase is offered at a good price that will provide a decent return on your investment, based upon both cash flow and some possible future capital gain - that you may not find some good buys in select markets.

U.S. housing recoveries almost always have been ignited by rising demand from families and individuals looking for a place to live. This recovery is different. Investors—including some big Wall Street players—are leading the way, say industry executives and analysts. Their role is noteworthy given that flippers and speculators were blamed for helping to inflate the housing bubble of the past decade.

Today's investors are mostly buying with the intention of holding on to the homes and renting them out. As they pile into the housing market, they have set off a chain reaction that has stabilized prices and changed market psychology, industry executives and analysts say. Fear of buying homes when prices are dropping has been replaced by the fear of missing out on cheap homes.

"Whether they knew it or not, investors helped set a floor. They warmed up the market, and it brought buyers back," said Lanny Baker, chief executive of real-estate brokerage ZipRealty.

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