Big investors like Blackstone Group, the world's largest private equity firm, began snapping up homes in droves two years ago.
The idea was to buy houses at bargain prices, rent them out for a while to earn income and then sell them at a profit as prices rose.
But prices have risen so sharply in some markets that homes have become too expensive for the investors to buy. Nationally, the S&P/Case-Shiller home price index for 20 cities jumped 12.9 percent in the year through February.
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Blackstone, the biggest buyer in the market, was making $140 million of home purchases a week back in July 2013, but now it's down to $30 million to $40 million,
The Wall Street Journal reports.
"We didn't anticipate prices going up 20 percent a year," Jonathan Gray, head of real estate at Blackstone, told the paper. "The distressed wave has largely passed."
Investors' business model has changed as a result of the sharp price increases, experts tell The Journal. Because it's more difficult to sell recently purchased homes at a profit, investors are holding on to the homes for their rental income.
To be sure, some experts remain bullish on housing. Existing home sales rose 3.4 percent in March, the biggest gain in almost three years.
"The backdrop in general for housing remains reasonably positive," Jim O’Sullivan, chief U.S. economist at High Frequency Economics, told
Bloomberg. "The labor market is improving, confidence generally has been edging up and mortgage rates are still pretty low."
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