House prices may go up and down over the next two years. But looking back it will appear relatively flat. That’s why it is a good time for patient investors to buy foreclosed properties, according to Rick Sharga, EVP, Carrington Mortgage Services.
“We believe there are a lot of people who won’t qualify or can’t afford to buy for a few years who would love to be able to rent a single-family home,” he told MREO.
Sharga noted that the rental income should provide a reasonable rate of return while investors wait several years for the “upside” when the housing market returns to growth. “We are bullish on the market long term. If it hasn’t bottomed out yet, it is very close,” Sharga said. CMS is trying to raise $1 billion from investors to buy and rent REO. FHFA and HUD are expected to roll out an REO sales program in the first quarter.
“FHFA is proceeding prudently but with a sense of urgency to lay the groundwork for the development of good initial transactions in early 2012,” an agency spokeswoman said last week. The program sanctioned by the Treasury will sell foreclosed properties in bulk to investors.
The successful bidders will be required to rent the properties for three years. The Obama administration is hoping this initiative will help stabilize housing. If the program is successful, Sharga said, it will stabilize rental rates, too. Fannie Mae, Freddie Mac and the FHA have large REO portfolios. But Carrington’s participation in the government initiative may hinge on how the FHFA and HUD structure the REO rental program.
“They are looking at a return to the taxpayer” along with neighborhood stabilization issues, the Carrington spokesman said. He noted the program may be more complicated than buying REO from a bank or other sources.
