Will Obama’s Plan to Turn Foreclosures into Rentals Help or Hurt Agents?

In a move seemingly aimed to help reduce credit losses and stabilize neighborhood home values, the Obama administration announced last week that they are considering renting out Fannie Mae and Freddie Mac mortgaged homes acquired through foreclosure. This attempt to boost falling home prices comes as foreclosures are expected to soar in the coming months. But will this plan actually make it tougher on agents?

The proposal aims to stem the tide of vacant houses and steady the market of home prices. This, in theory, keeps home values high. However, RE-Insider wonders how the government would determine what rent to charge. If rent is too high, the properties would likely stay vacant. If rent is too low, current landlords might fail to earn enough rent to stay solvent on their rental properties. And all that would hurt home prices even more.

This proposal comes as the market is about to be flooded with foreclosed homes, thereby driving up supply. According to the story from the AP:

At the end of last month, the government owned roughly 248,000 foreclosed homes, officials said. About 70,000 of those are listed for sale. But officials expect the number of foreclosures to soar in the coming months.

Many foreclosures have been stalled so attorneys general and federal regulators can investigate whether lenders cut corners and improperly handled thousands of cases. Once a settlement is finalized, foreclosures are expected to pick up again and further depress home prices.

The government also contends that this move would help to meet the growing demand for rentals. As more households turn from home ownership to renting, Fannie Mae and Freddie Mac are forced to try to sell off homes at 20% discounts. This lowering of sale prices affects home values of other properties in the area and can hurt those that aren’t suffering from the same foreclosure issues.

Please share your thoughts with us. Is this a good thing for agents?