Houses, houses, everywhere. Abundant supply and tight credit should mean falling prices, but Uncle Sam wants to protect the value of its housing inventory.
Nationally, home prices in May were 7.4% lower than a year earlier, but after excluding distressed sales, prices fell just 0.4%, according to CoreLogic Inc. Foreclosures and other distressed sales now account for about 30% of homes sold each month and sales from government-related entities make up about one third of that number.
“Adding more stock simply increases that overhang. If that can be avoided, it should be,” says Jared Bernstein, an economist who left the White House in April and is now a senior fellow at the Center on Budget and Policy Priorities, a liberal think tank in Washington.
So the latest idea to keep prices up? The government is thinking of getting in the rental business.
One proposal winning support among some federal officials would sell thousands of foreclosed federal properties to private investors who agree to rent them.
Investors would rehab homes, run the leasing process, and contract with national property management firms to handle day-to-day tenant demands.
The government could keep a stake in the venture, modeled on loss-share transactions by the Federal Deposit Insurance Corp. Officials have received interest from around a half-dozen private investors, according to people familiar with the matter.
I’m not surprised that there are investors interested in this program. It’s always nice to have someone else finance your investment and reduce your exposure. Investors however, are already a large part of the market. When homes are priced right, there are willing buyers. But the government is hoping to keep from sustaining losses due to falling prices.
Renting out homes could cover the costs of holding the properties until they can be resold once markets stabilize, potentially turning a profit for mortgage titans Fannie Mae and Freddie Mac or the Department of Housing and Urban Development, which handles foreclosures on loans backed by the Federal Housing Administration.
Given the difficulty in managing such a diverse and massive inventory of homes, this could be a difficult program to manage.
But scattered-site rental programs could require the government to become a national landlord, an area where the mortgage firms have little experience. They also pose accounting challenges that could produce big upfront losses.
The government will continue to be loathe to dump its large inventory of properties. I would not be surprised if they didn’t come up with some sort of rental program. That’s a mistake. It would be one more loss for taxpayers. It would be better if they left the landlord business to the professionals and leave the taxpayer wallet alone.
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Good grief. I know that it is an unlikely scenario, but I wonder what “federal officials” in a Paul administration would think of such a plan.
RASMUSSEN: Obama 41%, Ron Paul 37%
http://www.rasmussenreports.com/public_content/politics/elections/election_2012/election_2012_presidential_election/obama_41_ron_paul_37
I think the government should think of solutions which could benefit all but not hurt the taxpayers’ pockets.