So inventory is high with all these foreclosures and, therefore, property values are down. So what does the government want to do about it? According to the Wall Street Journal, they have two interesting options to help drive home values up again.
The first scenario is to sell packages of foreclosed properties in batches of hundreds or thousands to investors who would in turn agree to rent them out. At the end of June, Fannie Mae, Freddie Mac, and the Federal Housing Administration owned about a combined 250,000 homes. There’s about 830,000 that are still in the foreclosure process that would eventually land in their laps.
The second option they’re looking at is to “let investors enter joint ventures with Fannie or Freddie to invest in a pool of converted rental homes. A national property-management business would handle day-to-day landlord responsibilities. Investors would pay for rehabbing and maintaining properties and would share revenue from monthly rental income and the ultimate sale of the property.” So they basically figure they can rent out the homes in order to keep them from being listed currently and to earn some money back.
Since there’s a lot less buyers today qualifying for loans or even willing to purchase, it’s investors who are picking up some of the inventory.
Both scenarios are interesting propositions. I worry about the second one since that basically would make the government the landlord. And that’s just another controlling factor that they shouldn’t be a part of. And then on top of all the foreclosed homes they’re so slow to deal with already, how are they going to handle late rent payments or problems in the property? They mention that a national property manager would deal with it, but that’s a huge influx of properties they will need to take over. So can they really handle it? I appreciate what they’re trying to do, but I don’t know if this is the best solution.
I’m definitely interested in hearing more about the first scenario, selling foreclosures in bulk. By offering a package deal, that would also keep a lot of foreclosures off the market.
I’d love to hear your thoughts on these scenarios and if you have other suggestions for how the government can or should be involved. Please leave me a comment or visit me online.