Government holds too many distressed, foreclosed homes. Rent 'em!(Read article summary)
If Fannie Mae and other agencies sold their more than 1 million distressed or foreclosed homes, it would glut the market. But it could rent them.
Point #1: The housing market is still glutted with excess inventory and thus remains a fat, hairy albatross around the economyâ€™s neck (i.e., if birds can be hairy).
#3: As shown in a research note today from Goldman Sachs (from the nice economists, not the nasty traders), these federally held or backed mortgages now comprise the majority of bad loansâ€”the ones either in or heading for the foreclosure process. The first quarter of this year â€śmarked the first quarter since 2009 that the GSEs and FHA were a combined net supplier of foreclosed properties to the market.â€ť
#4: So, given #1, once these properties foreclose (or even when theyâ€™re headed in that direction), canâ€™t the govâ€™t do something better than dump these on the housing market!?!
Yes, and hereâ€™s what it is: RENT THEM.
The rental market is far from glutted (rents are rising even while home prices are falling). Sure, there are weeds hereâ€”FHA and the GSEs may view this type of restructuring as not being a good conservator of the taxpayersâ€™ investment, implying that they could recover the losses on the debt by reselling the property. But as the GS folks say, â€śthis [rental idea] could make sense from a financial perspective, given that recovery rates on distressed properties are low, rents are rising, and the rest of the GSE book of business would benefit from stabilization in home prices.â€ť
Iâ€™m tellinâ€™ youâ€”Iâ€™ve got a good feeling about this idea. We should try itâ€¦quickly!
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.