A new report predicts the market for foreclosed homes that are turned into rentals will be worth more than $100 billion this year.
Rents are on the rise as home prices fall. That has policymakers promoting the idea that selling foreclosed homes to investors as rentals could be a positive for the housing market — helping take down the inventory of distressed properties and putting a floor on prices.
Last week, the Federal Reserve released guidelines that could encourage the practice of converting lender-owned foreclosed homes into rental properties.
By converting foreclosures to rentals with steady cash flow, banks could reduce the number of their “substandard assets,” a classification used by banking regulators to determine the health of banks.
The central bank also said that lenders could receive Community Reinvestment Act credit for providing housing to low- and moderate-income people by successfully converting foreclosed homes into rentals.
On Tuesday, data tracker CoreLogic said that the market for turning foreclosures into rental homes is increasingly becoming an attractive new investment opportunity. The report said that the market could be worth more than $100 billion in 2012.
The trend of investors snapping up low-priced foreclosures is already playing out throughout Southern California. As longtime Los Angeles real estate agent Leo Nordine recently told The Times, “I’ve never seen it like this before…. There are so many investors buying right now it’s insane. The top 1% is buying up all the real estate.”
Original post by Alejandro Lazo