To Rent or Not to Rent

It’s encouraging to learn that the US government is considering a new strategy to handle the glut of unsold homes.

Resulting from many defaulted mortgages, the Fed through its mortgage insurance agencies, Federal Home Mortgage Corporation (also known as Freddie Mac), and Federal National Mortgage Association (Fannie Mae), has become the de facto owner of about a quarter of a million of foreclosed homes. And efforts to sell these vacant homes only depressed the house prices further. So instead of dumping additional homes to an already oversupplied housing market, the government is considering renting out the homes it owns.

By reducing supply, the people behind this idea think renting out the excess inventory can help the housing market to recover. In addition, demands for rentals are rising and so are the rents. The steady rental income can definitely help defray some of the expenses the government spends on maintaining the unsold inventory.

At present both Freddie and Fannie have already rent out many of the homes they own. Therefore, it is really a nonissue when the people against this idea consider both these two mortgage insurers are unfitted landlords.

When and if the Fed follow through with this idea, it can implement this measure expediently by simply changing the laws without outside investors. So both Freddie and Fannie can rent out all the homes they still own.

I remember seeing on television that showed many Americans are now living in motels and hotels. Therefore, I think it is high time the US government make good uses of many vacant homes to house millions of its homeless populations.

Moreover, many bankers and accountants would know that value of a property increases when it generates income. Schemes to rent or rent-to-own can also be a savior for lenders with many foreclosed properties.

Therefore, I think in this case to rent is a win-win proposition - Ayee .