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Anyone in real estate during the aftermath of the mid-2000s
financial crash would likely agree that the real estate owned
(REO) market was a bright light in real estate during the high
default environment. Just look at what was happening: e
boom of opportunistic construction starts across markets was
squashed out by the reality that potential buyers had limited cash on hand or
financing options to purchase those properties. Simultaneously, homeowners
across the country found it difficult to pay down their mortgages.
REO, foreclosures, and short-sales have
always been around, but the environment
nearly a decade ago, when aged REO
inventories skyrocketed and prices dropped,
led to dramatic growth and opportunity in
what was typically a sleepier real estate sector
– one that always served a purpose, but largely
existed under the radar.
As the REO market adjusted to new levels of
inventory, business models on Wall Street shifted
to take advantage of the opportunity within
the high default environment, which gave way
to the rather nascent but thriving sector of the
single-family rental market. Wall Street investors
were the first to see the enormous potential that
the market conditions provided. Household
investment firms, like Blackstone, parlayed the
strong REO inventory into a profitable real
estate play. According to a 2013 Wall Street
Journal report, "Blackstone Group LP [became]
the biggest U.S. investor in single-family rental
homes by spending more than $1 billion since
the start of 2012 to acquire more than 6,500
foreclosed houses in eight metropolitan areas."
As of 2015, it held 50,000 houses, nationwide.
I N D U S T R Y I N S I G H T / J I M L E A T H
WHAT'S NEXT
FOR REO?
