High-poverty neighborhoods in Twin Cities see explosion of investor-owned homes. The Minneapolis Fed now is keeping track

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High-poverty neighborhoods in the Twin Cities have seen an explosion of investor-owned homes since the Great Recession, a trend that has caught the attention of the Federal Reserve Bank of Minneapolis.

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Sections of North Minneapolis already had above-average rates for investor-owned homes before the subprime mortgage crisis, but a new Minneapolis Fed report shows that the rate “got worse as homes were foreclosed and foreclosed by landlords.” was scooped.”

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One concern is that investors with deep pockets “make it harder for families, especially low-income families, who are more likely to people of color, to compete in the home buying process,” according to to report,

Take northeastern Minneapolis, which has a high poverty rate of 41.7%. Investors now own 30.7% of residential properties in the area, using the highest level of 20 Twin Cities-area census tracks studied by the Fed. A new housing data tool It was developed to study the impact of investor-owned homes on local communities.

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Another concern is that investors moving to poorer neighborhoods with high crime rates could cause a “deterioration in housing quality,” according to the report, which pegged the Twin Cities area’s overall investor ownership rate at 4.1% this year. , which is above 1.8. % in 2006.

“That is, they buy affordable properties, charge relatively higher rents from tenants, who have few housing options, and provide minimal maintenance to maximize their profits,” the report said.

“Since properties were purchased cheaply and there is little chance that they will appreciate greatly in value for resale, there is no incentive to take care of them.”

housing inflation

America faced an affordability crisis in housing long before the pandemic set in, sending prices through the roof.

According to the latest edition of the Real House Price Index from title insurance company First American, in August, nominal US home prices rose a record 20.7% over the previous year, resulting in a 17% decrease in housing affordability rates over the previous year. . Financial Corp. FAF,
-0.09%,

Institutional landlords first entered the fray in the past decade by demolishing foreclosed homes for rental income. Most Favorable Properties in Lower-Poverty Areas With Good Schools – Invitation Homes Inc. Including INVH,
+0.98%
and American Homes 4 Rent AMH,
+2.04%
– Successfully raising billions for his strategies on Wall Street.

So far this year, $13.7 billion in single-family rental bonds have been sold, according to Deutsche Bank data.

Importantly, the Minneapolis Fed report also breaks down homeownership by county and investor type. The results underscore the large, but declining, ranks of small landlords in the Twin Cities area, but also a growing segment of very large investors owning 50 or more homes.

Small owners hand over land to medium and large time landlords.

Federal Reserve Bank of Minneapolis

Lately, it hasn’t been entirely smooth for some institutional players in the red-hot US housing market. Earlier in November, Zillow Group Inc. Z,
+2.05%

ZG,
+1.38%
announced that it will abruptly terminate its home-buying business and expects to lose approximately $550 million on the homes it purchased.

ReadingZillow’s $1.2 billion mortgage bonds are in focus after the company’s abrupt exit from the home-buying business

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