[quote=EconProf]I think Blackstone is going to make a lot of money, and deserves to. Buying foreclosures or short sales or fixers is traditionally an entrepreneurial mom and pop venture, done a few at a time. But this is inefficient because there is a big learning curve involved, as can be attested by anyone who has tried it. Blackstone has discovered that the process is subject to economies of scale for a big company that does hundreds or thousands of houses at once. They can study the market to know how much to pay, can bid cash to idiot lenders anxious to unload, can analyze the property’s needs and send in their tried and trusted workers to quickly execute, then market the property for sale or rent. With this mass production approach they add the most value with the least cost and downtime and extract the most profit. We may resent their success because they are capitalizing on the distressed housing market, but like sharks cleaning up carcasses in the ocean, their profit-seeking is improving neighborhoods and serving society. Adam Smith would approve![/quote]
A Blackrock investor would say that they are doing what needs to be done in 0% rate environment. It is a very interesting asset class, possibly better than lumber. If they are too successful, they may outbid first time buyers with 100% cash and possibly overpay creating resentment from people who are losing out of the American dream?
