Full
Property Management Article At:
http://www.bloomberg.com/news/2012-04-24/millions-more-u-s-homeowners-to-rent-pimco-s-simon-says.html
The U.S. homeownership rate may fall two percentage points
to 64 percent, below historic norms, amid about six million additional
foreclosures and tight lending standards, according to Pacific Investment
Management Co.’s Scott Simon.
“You may be turning another 4 million homeowners into
renters,” Simon, the mortgage-bond head at Newport Beach, California-based
Pimco, said in an interview on Bloomberg Television’s “Surveillance Midday”
with Tom Keene.
Homeownership has declined from 69.2 percent in 2004, the
highest on record, after loose credit and soaring property values drew buyers
into the market, according to the Census Bureau. While owning is now
“incredibly cheap” compared with renting for consumers who can qualify for
loans, relatively few Americans can take advantage of the opportunity, Simon
said. The proportion of Americans owning their homes averaged 64.5 percent in
the 1970s and 1980s.
U.S. home prices are down 35 percent from a 2006 peak, after
declining in February to the lowest since 2002, according to
S&P/Case-Shiller index data on value in 20 markets released today. Prices
are poised to drop an additional three or four percent before bottoming during
the next 12 months, Simon said.
“We really haven’t changed our view about where this will
end for two or three years,” he said. Data on new home sales, which today
surpassed economists’ estimates, is essentially unimportant because activity is
set to remain depressed after “about 4 million extra houses” were built during
the boom, he added.
Renting Foreclosed
Properties
Pimco, which runs the world’s largest bond fund, raised the
mortgage holdings of its $252.5 billion Total Return Fund (PTTRX) in March to
53 percent, the highest share since 2009, according to data on the company’s
website.
Simon said he agrees with the Federal Reserve that it would
be useful to create a government lending program for buyers of foreclosed homes
who plan to convert them into rentals. Fannie Mae (FNMA) and Freddie Mac, the
government-supported mortgage companies seized in 2008, would be the logical
sources of the financing, which would bring investors out in “droves,” he said.
“The problem is that Fannie and Freddie are such a lightning
rod in Washington it’s very hard to use them,” he said. “You have to say you do
not like them, that you have to shut them down.”
Fannie Mae is now seeking bids for bulk sales of about 2,500
foreclosed homes under a test program, its regulator said in February. The Fed
suggested that the U.S consider providing financing to investors buying such
blocks of properties in a January paper that Chairman Ben S. Bernanke sent to
Congress.