I have previously argued in favor of estimates that 10% of the U.S. population–comprising 33 million people–will shift over the long term from owner occupied to rental housing. The reasons include massive student loans burdening the generation most likely to buy, damaged credit, and shifting values, as well as a return to historical norms. To accomplish this shift, not only will apartment-style condos become rentals but so will many single family homes.
The federal
Foreclosure auction signs (Photo credit: niallkennedy)
government is starting to shed foreclosed, single-family
homes it owns — by selling them in bulk to investors, who would
turn them into rental properties. Officials, however, are saying
only that test sales will occur “in the near-term” with a focus
on the areas hardest hit by foreclosures. They declined to
comment beyond a news release they issued. The test comes after
the government in summer 2011 asked for proposals on what to do
with more than 90,000 foreclosed properties it then held. The
government typically sells foreclosed properties one at a time,
but officials specifically asked for ways to move homes in bulk
because of the size of the backlog. About 4,000 groups or
individuals submitted ideas on how the government could unload
the properties. After The Enquirer filed a Freedom of Information
Act request, the government released a list of 423 companies,
groups and individuals that submitted responsive proposals, but
no details on their proposals.
To qualify, investors will have to show the financial wherewithal
to buy the assets, sufficient experience and knowledge to bear
the risks and manage of the investment and agree to “keep certain
information about the REO (real estate) and related matters
confidential.” Nationwide, the 83,000 homes currently up for
sale and potential conversion into rental units are among more
than 200,000 foreclosures of all kinds that the government holds,
apparently making it the nation’s largest owner of foreclosed
properties. The 200,000 is almost a third of foreclosed
properties across the nation. Moving the backlog would get them
off the books of the Federal Housing Administration. It also
would clear the books of Fannie Mae and Freddie Mac, which buy
mortgages, bundle them and then sell mortgage-backed securities
to investors. The FHA, Fannie and Freddie became owners of the
properties as hundreds of thousands of owners defaulted on their
mortgages during the real estate meltdown. Clearing the backlog
would limit the loss to taxpayers, who already have bailed out
Fannie and Freddie at a cost of $169 billion and counting. The
losses are expected to total $220 billion to $311 billion by the
end of 2014, according to latest projections in December by the
Federal Housing Finance Agency.
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