Investors seeking to buy and then rent foreclosed properties from Fannie Mae and Freddie Mac have raised at least $2 billion in the last six weeks, according to housing analysts at Morgan Stanley.
Private investors are "continuing to gear up for what is perceived to be both a massive and long-term investment opportunity," Morgan analysts write in a new report.
Fannie soon will conduct its first bulk sale of REO and non-performing loans under a new pilot program. The first sales will feature assets located in the hardest-hit areas, according to the Federal Housing Finance Agency.
As of Sept. 30 Fannie owned 34,400 REO units in Arizona, California, Florida and Nevada. It also controls 28,300 foreclosed properties in four hard-hit Midwest states.
"The first transaction will be announced in the near-term," FHFA said in a recent press release.
Morgan Stanley analysts note that FHFA so far has provided "very few details" about the pilot program, which will require buyers to rent and manage REO properties for up to three years. "That said, we are pleased that the government is taking careful consideration when designing this program given the importance we believe it holds for the future success" of the bulk purchase of Buy-to-Rent inventory, the analysts write.
Morgan believes the government program will set the foundation for the buy-to-rent concept to take off and eventually lead to the rehabilitation of 4 million homes and create 1 million jobs.
Such positions might involve temporary construction jobs as well as more permanent property management, leasing and maintenance posts.
"With the added benefit of the potential for significant private sector-led job creation, in the hardest-hit sectors in the hardest hit regions, we are increasingly confident that Buy-to-Rent can have a positive impact on housing and the macro economy as a whole," the Morgan Stanley report says.
