THE BASIS POINT

PIMCO’s new MBS fund. Builders enter rental business.

Yesterday’s DailyBasis discussed REIT’s raising money to buy MBS’s, then a story broke about PIMCO doing exactly that! There is, of course, little correlation, and granted, the $600 million that Pacific Investment Management Co. is raising is less than the average daily volume of MBS’s traded in the market, but it is a good sign. PIMCO recently made financial headlines by divesting itself of all Treasury debt, claiming that debt levels were unsustainable given the budget problems facing the US. The REIT money will go toward commercial and residential mortgage-backed securities, real estate-related assets and other financial assets. “Significant increases in regulation and public policy are influencing which investors will have the financial ability to hold real estate-related assets. We believe that private non- bank capital will represent an increasing share of these assets in the years to come.”

Under the just-made-up category of “If you can’t build ’em, join ’em,” Beazer Homes USA is officially entering the rental business, as the home builder started a new division to acquire and rent recently built, previously owned homes. Beazer will include pre-owned homes built since 2004 near Phoenix, including homes built by Beazer, purchased, or re-purchased, in distressed sales. And when the housing market recovers it will re-sell them. Something tells me that they’re not alone in doing this. Besides private investors with lots of cash buying non-owners, waiting for the same thing to happen, Lennar Corp., with orders down 12%, is doing the same thing with its Rialto Capital business. People need a place to live, right?

KB Home, whose joint venture deal with Bank of America is rumored to be in trouble, reported a 32% drop in home orders for the December-to-February quarter compared to it’s year-ago results. Builders everywhere are grappling with potential buyers who are in no hurry to sign on the dotted line given the potential of falling prices and cheaper inventory coming onto the market, unemployment & a plodding recovery, and tighter documentation and underwriting standards.