a driver for the housing market....​.

For consideration……

By Margaret Collins, John Gittelsohn and Heather Perlberg -Feb 4, 2013

JPMorgan Chase & Co. (JPM) is giving its wealthiest clients the chance to invest in the single-family rental market after other investments linked to the U.S. housing recovery jumped in value.
The firm’s unit that caters to individuals and families with more than $5 million,put client money in a partnership that bought more than 5,000 single family homes to rent in Florida, Arizona, Nevada and California, said David Lyon, a managing director and investment specialist at J.P. Morgan Private Bank.Investors can expect returns of as much as 8 percent annually from rental income as well as part of the profits when the homes are sold, he said.
The bank’s wealthy clients are joining a growing number of private-equity firms and individuals buying rental homes in the regions hardest hit by the U.S.housing crash.Blackstone Group LP (BX)has spent $2.7 billion, and said last month it accelerated purchases as home prices rise faster than anticipated. Even after home values in November gained by the most in six years, investors are wagering on rental properties as an alternative to housing-relatedstocks and mortgage debt that’s already soared.

Harder Mortgages

“It’s hard to find a private-equity firm on the planet that doesn’t have a strategy in this space,” Gary Beasley, chief executive officer at Waypoint Homes, said last week at the American Securitization Forum’s annual conference in Las Vegas. The Oakland, California-based company has bought homes in California, Arizona, Illinois and Georgia.
Since the 2008 financial crisis, lenders have required higher credit scores and larger down payments to qualify for mortgages. Borrowers whose loans for purchases closed in 2012 had an average credit score of 740, according to data compiled by real estate data service CoreLogic Inc., up from 716 in 2006. That’s contributed to a decline in the U.S. home ownership rate to 65.4 percent at the end of 2012 from a peak of 69.2 percent in June 2004, the Commerce Department reported.
The number of renter-occupied residences increased an estimated 1.1 million last year while the number of owner- occupied households fell by 106,000, according to a Commerce Department report.

Beaten Down

Buying single-family homes to rent in some locations has become more attractive to bond investors in the past year as mortgage-backed securities without the backing of the U.S. government have become more expensive, said Sandeep Bordia, head of residential and commercial credit strategy at Barclays Plc.
“If you look at some of the really beaten down areas -- Miami, Orlando, Vegas, Tampa -- we do think the return on that asset, if you just buy a home, collect the rent and do whatever you need to do on the cost side, you’re getting a return of somewhere between 6 percent and 8 percent,” Bordia said. Non- agency mortgage-backed securities are generally yielding 4 percent to 6 percent, he said.
The “sweet spot” in many areas would be homes prices between $100,000 and $150,000, Bordia and other analysts wrote in a Feb. 1 report. While smaller homes can provide the highest gross rental yields, there are fixed costs and the risk of higher tenant delinquencies, they wrote.

Getting Crowded

Even as the housing market probably will do well across the nation, areas where property prices already are high such as San Diego, Los Angeles, Denver and San Francisco, will see lower rental yields, of 4 percent to 5 percent, Bordia said.
Jumping into the single-family home market now carries the risk that it’s already getting crowded, and the bargains in the best locations are dwindling, said Craig Pastolove, a managing director at New York-basedMorgan Stanley. (MS)
“There’s a lot of capital out there that is chasing these investments,” so there may be price inflation, Pastolove said.
While buying single-family homes to rent is among “the smarter ways to invest going forward,” Pastolove advises wealthy clients to buy the properties to rent themselves if they are able. Morgan Stanley isn’t purchasing homes or managing them; instead it’s making loans to high-net-worth customers at rates lower than a typical mortgage, and using their investment portfolios as collateral. That provides people the capital to purchase investment properties, he said
http://www.bloomberg.com/news/2013-02-04/jpmorgan-joins-rental-rush-for-wealthy-clients-mortgages.html