Uncle Sam wants you to rent out its foreclosed homes

Oh Boy, here we go again.

 We’re from the government and we’re here to help!

Can anyone read this and not see a nightmare of bureauocracy, red tape, mismanagement, and major headaches about to happen.   Not only does it only address a “small percentage” of the homes they are holding but the bidder has to bid on all the properties so we know the little guys are out of it only the big hedge and pension funds are going to be able to “compete” and the government doesn’t even say to what extent they are going to tie their hands as to how long they have to hold them and rent them out….

I hate to sound negative but this just reeks of sound bites – look we’re doing something arm flailing and lipsmacking that’s nothing more than the proverbial pig with lipstick.  If the government wants to positively impact the economy and unemployment they need to let the local markets work the inventory out naturally.  Sell them one at a time to local investors who will have a vested interest – make money, improve the neighborhood and create jobs (contractors, plumbers, electricians, roofers, realtors, landscapers, property management, etc).  Why is it so hard to figure out?

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NEW YORK (CNNMoney) — Want to become a landlord in one of the nation’s hardest-hit foreclosure neighborhoods? Well, Uncle Sam has a deal for you.

Fannie Mae (FNMA, Fortune 500) will offer up nearly 2,500 distressed properties in eight locations to investors who are willing to buy them in bulk and rent them out for a set number of years.

The properties, which are located in Atlanta, Phoenix, Las Vegas, Los Angeles/Riverside, and three Florida regions, include all types of housing units, from single-family homes to co-op apartment buildings.

“This is another important milestone in our initiative designed to reduce taxpayer losses, stabilize neighborhoods and home values, shift to more private management of properties, and reduce the supply of REO properties in the marketplace,” said Edward J. DeMarco, the acting director of the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae.

The sales, which will cover a small fraction of the more than 180,000 properties Fannie and Freddie Mac (FMCC, Fortune 500) hold, will be open to qualified buyers under strict guidelines.

Most of the properties already house tenants and buyers will be required to continue to rent out the properties to them for as long as their leases last. Investors will also be required to rent the properties out for a specified number of years. The exact number of years has yet to be disclosed.

Investors must post security deposits in order to bid and also must prove that they are financially stable, have property management experience and have strong ties to the local community, such as a history of working with local development organizations.

FHFA said that bidders must purchase all of the homes that are for sale in a given metro area. In Atlanta, that’s as many as 572, while in Chicago it’s 99.

Despite the fact that the strict requirements could limit the number of applicants seeking to invest in the properties, the government agencies have said there is strong interest in the program. FHFA said it has received more than 4,000 responses to a request for public input on how best to dispose of the vast number of homes Fannie and Freddie Mac (FMCC, Fortune 500) have acquired from borrowers who defaulted on their loans.

Read the full story here.

Larry – In Deed

Buffett says America’s housing sector “remains in a depression of its own”

Guess we all make mistakes.  Funny how you can find an economist to use any facts or statistics you give them to come up with any answer (interpretation) you desire.  I was speaking with a friend today about filtering out all the static as it relates to signal processing and applying that to analyzing the stock market.  Same principles apply everywhere.  You’ve got to filter out all the noise and get to the core data to base your decisions upon.  Even Warren Buffett admits this is not foolproof and he’s only human after all, like the rest of us.

Here’s to taking in all the available data and learning to filter out the static.

Housing in ‘Depression’

Warren Buffett says America’s housing sector “remains in a depression of its own” but will eventually recover as America continues to create “more households than housing units.”

In the meantime, however, Buffett writes that the company’s housing-related units continue to “sputter.”

He admits that his prediction a year ago that housing’s recovery would probably begin within “a year or so” was “dead wrong.”

Buffett writes that the housing market’s continued weakness is “the major reason a recovery in employment has so severely lagged the steady and substantial comeback we have seen in almost all other sectors of our economy.”

The full story can be found here.  It’s a CNBC excerpt of Warren Buffett’s annual report to shareholders released this weekend.

-Larry

 

 

Reading the Real Estate Tea Leaves

Here’s an insightful analysis of gob-ment actions impacting Real Estate Investors, particularly landlords, by Ward Hannigan.

Huge Supply of Home Rentals Coming Soon

by Ward Hanigan

The major metropolitan areas that suffered the greatest number of foreclosures in the last 5 years (CA, NV, AZ, FL, etc.) are destined to be whacked all over again!

The pain will come about from the federal government’s new program of selling its ever-growing inventory of foreclosed homes (200,000 at last count) in bulk packages to private equity funds and institutional investors as rentals rather than for immediate resale.

The hope is that by shunting such properties into the rental domain it won’t depress our all-important retail housing market.

However, it’s obvious that the escalating supply of thousands of new rentals in such densely populated areas like Los Angeles, San Diego, Riverside, Phoenix, Las Vegas, Miami, etc. would dramatically over-saturate those rental markets…sending them all into a dramatic, downward spiral.

This plan was promulgated as a consequence of a study done by the Federal Reserve for President Obama’s administration (and sent to Congress by Chairman Ben Bernanke on January 4, 2012).

Such high level involvement and fact-finding meetings began in September of last year and have caused such a groundswell of anticipation that many hedge funds, partnerships, REITS, etc. are being formed and lining up ready to do business. Some of these investors claim to have a billion or more to spend in this sector.

So far some of the notable existing entities are GTIS in Menlo Park, Oaktree Capital in Los Angeles, McKinley Capital in Oakland, Cerberus Capital Mgmt., Och-Ziff Capital in New York, Deutsche Bank AG, Fortress Investment Group, Starwood Capital, TCW Group, Inc and UBS AG.

It’s readily apparent that this program is well underway and will happen sooner rather than later. So now’s the time to fix and spruce up your rentals and switch from a month-to-month rental basis to an annual lease basis.

After years of renting houses and apartments in all kinds of markets I’ve learned that in a buyer’s market the majority of renters are very price conscious. So to avoid a prolonged vacancy in such a competive market I always price my empty unit at $5.00 less per month than anyone else in the same neighborhood who’s advertising a similar type unit (i.e. 1br/1ba).

Thankfully my 1br/1ba dingbats aren’t so affected by the competition since my vacancy rate with those little houses average about once every 16.2 years.  

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