More competition for real estate investors

Most news outlets reported yesterday that Senate Republicans and Democrats have reached an agreement in principle, about new measures that would appropriate about 30 billion dollars for (among other things) the purchase of foreclosure properties. In other words, the government is planning to purchase foreclosures in order to repair and resell them. Sounds like an investor to me…

The official rationale for this strategy is to help real estate values recover by "unclogging" some of the existing distressed inventory of properties. However, being deeply involved with the post foreclosure (REO) industry, I can tell you that in relatively stable markets like the Houston Real Estate market, distressed properties get acquired at a healthy pace by local investors as well as homeowners looking to purchase a home with built in equity. I am not sure that the current housing situation can be solved by the state and federal government turning into Flip this House. In my view, the focus of aid should revolve around helping homeowners refinance   to fixed rates that should match their pre adjustment rate.

Although the current housing issues are very serious we have to ensure that we take appropriate measures as opposed to knee jerk reactions. Instead of the government paying off entire mortgages to reduce foreclosure inventories, wouldn’t it make more sense for them to simply subsidize a portion of the balance to give incentives to investors and homeowners to purchase more properties instead? In this manner you could move a larger amount of distressed inventory with smaller tax dollar consequences
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Watch out UG… The government might  buy ugly houses too.

Houston Foreclosures