The waiting line is already being formed of investors to buy up low-priced real estate and mortgage-backed securities cheap. Some 400 different funds are being developed ranging in size from $25 million up to multi billions of dollars, a Housing Predictor investigation has revealed.
These investors are composed of investment companies, Real Estate Investment Trusts (REITS), individual investors and partnerships being developed as companies to protect individual investors from liability.
Like Venture Capitalists looking for a new opportunity to snag, this new breed of investors are already being called the “New Vultures” since they wait for their investment prey before going in for the kill, investing in securities and real estate at a low enough price.
The New Vultures have a lot more capital than their predecessors in the U.S. Savings and Loan Crisis in the late 1980s. Most investors have amassed large profits in real estate and on Wall Street already. They have billions of dollars to invest and they are just waiting for the bottom of the cycle before stepping up to the plate.
The charred assets include mortgage-backed securities and real estate, including what could potentially be purchases from a government grown asset management company like the Resolution Trust Corporation (RTC) in the Savings and Loan Crisis.
The credit crisis has established itself as a modern day nightmare for many people, but for this investment elite it is transforming into a modern day fairy tail to potentially produce the greatest transfer of wealth in at least a generation.
Housing prices are still forecast to deflate further in the majority of markets throughout the country. The New Vultures say they are waiting for what might be close to a bottom of the market and for government officials to set up a plan to allow them to step into make their purchases.
“We expect to be able to buy mortgage-backed securities at 20 to 30 cents on the dollar,” said Dave Thompson, a New York investment banker, who is forming a Limited Liability Company to make purchases. “Homes will be sold at 30 to 40 cents on the dollar in many cases, and we intend to target markets where we expect things to turn around sooner rather than later.”
The Treasury Department and the Fed are acting to do everything they can to halt the falling economy, and the Fed is considering interest rate cuts in further attempts to stabilize the marketplace. The problems, which started on Wall Street with the invention on new creative instruments to sell mortgages at record numbers, are making severe impacts on communities across the nation with the highest number of foreclosures in U.S. history.
“A large part of our banking community is probably sitting back and saying, ‘Let’s see what the government does,’ ” said Phil Dixon, president of Treadstone Partners LLC, a Dallas investment firm. Dixon and others in oil-rich Texas are forming partnerships to make purchases when the timing is right.
All of the securities and real estate being considered for purchase are either subprime generated assets or adjustable rate mortgages, which are at the heart of the credit crisis.