The REO Initiative, the government-led plan to convert thousands of GSE-owned REO units into investor-managed rentals, has been meet with both tacit and strong support from economic analysts, but Realtors appear to be lukewarm toward the measure, if a recent release from the National Association of Realtors and local agent reactions are considered.
Moe Veissi, NAR’s president, argued in the press release that with REO demand as high as it is, a government-led plan would be superfluous.
“As the nation’s leading advocate for homeownership and housing issues, Realtors support efforts to reduce the high inventories of foreclosures, but all real estate is local and we are concerned that REO-to-rental programs are not necessary in some areas and could even hinder the recovery,” Veissi said. “In many communities REOs are already moving well through the normal processes, so we urge caution when proceeding with a rental program.”
Instead, NAR and Veissi suggest that lenders ease requirements for consumers and increase access to loan modifications, refinancings and short sales. That, in addition to a national advisory board that NAR suggests to oversee the REO initiative (to ensure, according to the release, that the plan truly aids local communities), would be a more helpful way to address the country’s stock of REO properties.
Jack Persin, the co-president of the Mainstreet Organization of Realtors and the managing broker of Ryan Hill Realty in Naperville, said that he also disagrees with the government’s strategy of soliciting investor-interest in bulk numbers of distressed properties.
Along with the impact that such a measure could have on prices, Persin said he also sees the Initiative as an inhibitor to agents’ business; after all, the more properties that are consolidated for investors, he says, the less agents will have access to for transactions.
Instead, Persin recommended a greater emphasis on lending and short sales to avoid foreclosures, though he said that banks have, thus far, been unresponsive to those programs and communication has been minimal. As a result, the programs have not worked as quickly as they should.
Lawrence Yun, NAR’s chief economist, also said the REO plan is unnecessary, and his comments reflected another opinion that Persin expressed – that inventories have been falling the past year and are in no need for an REO program. Persin said that in the western neighborhoods that he services, which include Naperville, Aurora and Oswego, the absorption rates have recovered considerably.
Yun did admit, though, that the Initiative could work in select markets.
“Inventories of condos and single-family homes for sale continuously fell last year, suggesting that there is no significant oversupply of visible foreclosure inventory in the market,” Yun said. “Even the shadow inventories of distressed homes have fallen, though they remain elevated and are an ongoing concern. The government REO-to-rental plan could work in areas where buyers are not quickly absorbing the shadow inventory.”