Obama Administration Takes Further Steps to Help the Housing Market

With the housing market still depressed almost five years after the housing bubble burst, the Obama administration is seeking input from private investors on methods to convert foreclosed properties owned by Fannie Mae and Freddie Mac into rental homes.

Currently, the two GSEs have about 250,000 foreclosed homes, which is about half of the total unsold repossessed properties on the market. Obviously, this collection of unsold homes is depressing the market by pushing down housing prices, and the lack of recovery in the housing market in one of the major attributions to why the pace of overall economic recovery has been tepid. Also, rents in many urban areas have been rising rapidly due to increased demand of rental units and not enough supply. 

Faced with these two problems, the administration is trying to take the foreclosed properties off the housing market and push them into the rental market. This proposal would push housing prices up by removing the glut of foreclosed homes from the market, while putting downward pressure on rental costs by increasing the supply of rental units available.

The administration is looking for proposals from investors, so the exact details of this move are not clear. As for budgetary effects, it does not appear that this plan would have significant direct effects (although since the US is backing Fannie and Freddie, their losses might have to be recouped from the budget), but we will have to see what the final move is. What we do hope is that this plan can get the housing market going and, of course, the broader economy. We will need a robust economy to get our deficit down.