REALTOR® officials say the recently announced government pilot program to turn REO properties into rentals could be counterproductive in some markets, particularly in California, where inventory is slow and demand for homes continues to be high.
The Federal Housing Finance Agency (FHFA) announced last month that it will sell 2,490 Fannie Mae-held properties to private investors in distressed markets around the country. On the list are properties in Chicago, Atlanta, Las Vegas, Los Angeles, Phoenix, and in several cities in Florida.
REALTORS® are not too keen on the idea and say the government intervention could actually be disruptive for some markets. The National Association of REALTORS® (NAR) has urged the FHFA to proceed with caution on its Real Estate-Owned (REO) Initiative pilot program to sell homes repossessed by government agencies to private investors to convert into rental units.
"As the nation's leading advocate for homeownership and housing issues, REALTORS® support efforts to reduce the high inventories of foreclosures, but all real estate is local and we are concerned that REO-to-rental programs are not necessary in some areas and could even hinder the recovery," said NAR president Moe Veissi.
REOs are already moving well through the normal processes in many communities. "Inventories of condos and single-family homes for sale continuously fell last year, suggesting that there is no significant oversupply of visible foreclosure inventory in the market," said Lawrence Yun, NAR's chief economist.
The California Association of REALTORS® (C.A.R.) officially opposes the implementation of the plan in the state. Given the low inventory and high demand, C.A.R. says there is no need for the pilot program even in distressed areas of the state. Fannie Mae plans to sell 484 homes in the Los Angeles/Riverside area to private investors.
Silicon Valley Association of REALTORS® president Suzanne Yost said ensuring mortgage availability for qualified home buyers would be a better way of absorbing excess foreclosure inventories across the country. "The strict lending requirements have been a barrier to even creditworthy home buyers. More short sales, loan modifications and refinancing of mortgages would be a better option to help stabilize distressed housing markets," said Yost.
In addition to over 400 properties Fannie-Mae plans to sell to private investors in the Los Angeles area, the government-sponsored enterprise will sell 572 properties in Atlanta, 99 in Chicago, 219 in Las Vegas, 341 in Phoenix, and 775 in a handful of cities in Florida.
NAR recommends the creation of a national advisory board to ensure that current and future REO-to-rental pilot programs truly benefit the local community, minimize taxpayer losses and stabilize home values. NAR also suggests that local market experts, particularly real estate professionals, should be part of the board because they would have in-depth knowledge of local market conditions.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.