Analyst finds fault with federal housing program

| March 21, 2012 More

The efforts of the Federal Housing Finance Agency and the government-sponsored enterprises it manages to sell foreclosed properties are unlikely to be very beneficial to the housing market, one analyst recently wrote.

According to Paul Dales, senior U.S. economist for Capital Economics, the fact that the first phase of the initiative is selling largely properties that already have tenants will limit the impact of the program. About 85 percent of the 2,490 REO assets being sold are occupied, according to the report. Supporters of the program say that it is easier to price units with tenants.

As a result, they will not contribute materially to housing availability or reduction in vacant inventory, Dales notes. The assets slated for sale so far represent about 1 percent of the total held by Fannie and Freddie.

Despite these criticisms, the program could still be successful in encouraging private involvement in real estate and beginning to decrease the government role in the housing sector, which has grown in recent years. Many lawmakers, officials and private individuals have stated that the federal government should be seeking to reduce its activity in the housing sector.

This program will still shift holdings to private investors and property management companies, among other stakeholders, decreasing federal housing inventory. It is also true that the first phase of the program is meant partly as a test, and subsequent sales of REO assets may focus more heavily on vacant units.

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Category: Housing Headlines

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