The feds are running out of ideas on how to deal with the number of foreclosed properties on their hands – especially since the government owns roughly 267,000 out of the million or so foreclosed properties around the United States.
One solution being put up is for the government to sell these properties in bulk to investors. These investors will then go about renting the properties out.
It sounds like a win-win situation at first, but what is really at stake here?
Jared Bernstein, former member of Obama’s economic team and Chief Economist and Economic Adviser to Biden believes it is not a good idea.
“Foreclosed homes sold by government entities are already providing the taxpayer with a pretty lousy return. Will that return get lousier? It probably will,” says Bernstein.
Nick Timiraos of the Wall Street Journal says that unsold foreclosure properties are hurting the real estate market just the same.
He says that a high-priced home could lose a significant chunk of its value if it is in close proximity to a shabby, unmaintained piece of foreclosed property – especially when appraisers use the price of the foreclosed property as a basis for neighborhood prices.
At the end of the day, though, the feds will have to do something with the foreclosures that’s sucking up property values in the neighborhood.
Bernstein recognizes this dilemma, saying that “If it doesn’t work, it’s not going to hurt the budget. It just means that another idea didn’t work.”