New financial product may fuel housing bubbles

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A new financial product may help investors hungry for single-family rentals to snap up more of them, potentially setting some housing markets up for busts.

The product is a form of bond tied to single-family rentals that institutional investors — which by one estimate have already bought 200,000 homes in the last two years — are increasingly issuing.

The bonds could  fuel purchases for single-family homes because they provide home investors with more leverage to buy more homes.

The Federal Reserve has warned that if landlords take on too much debt thanks to the easy money offered by these bonds, they may eventually race to sell off their properties, potentially flooding markets with inventory, and as a consequence, driving down prices.

Source: The New York Times

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