Hedge funds and investment firms are buying up Florida foreclosures, beating out homebuyers and local flippers, while steering the state into what some fear is another real estate bubble.
The companies, including New York-based Blackstone Group and Lake Success Rentals, a partner of Toronto-based Tricon Capital Group, purchased an estimated 5,300 Florida homes last year that were in some stage of foreclosure, according to a report from RealtyTrac.
In Palm Beach County, RealtyTrac measured 425 purchases by firms buying multiple properties out of foreclosure and usually with the intent to rent them out until increasing property values can offer a substantial return on investment.
RealtyTrac Vice President Daren Blomquist said the buying trend accelerated around the second quarter of 2012 after billionaire business magnate Warren Buffett said he would buy up “a couple hundred thousand” single-family homes if he had a way to manage them.
But Blomquist warned that prices jacked up by the increased competition could lead to an artificial inflation.
“There is some potential for locally based housing price bubbles because of this almost frenzy on the part of these big-money folks to purchase as many properties as they can,” he said. “They’re paying cash, so it shouldn’t result in a lot of foreclosures, but it may be that down the road, they decide the gamble isn’t paying off and flood the market with properties.”
Florida’s biggest buyer last year was Malibu, Calif.-based American Homes for Rent, with more than 260 purchases, according to RealtyTrac. The Blackstone Group-related company THR Florida, LLC, had more than 160 purchases.
But both of those companies focused their efforts mostly in areas outside of South Florida.