Jeremy Hobson: Bank of America has a new plan for borrowers who can't afford their mortgages: Get homeowners to hand over their deeds in exchange for debt forgiveness, and start renting the house back at market rates. It's a pilot program for now, but something similar is already happening.
According to Bloomberg Markets Magazine, private investors are buying up foreclosed properties by the bushel and renting them out at a profit.
Senior writer Ed Robinson interviewed the investors and he joins us now. Good morning.
Ed Robinson: Good morning.
Hobson: Well tell us exactly what is happening when it comes to these big investment firms trying to make money in the housing market right now.
Robinson: These firms are taking a look at the huge wave of foreclosures that have been coming out in the market since the 2007-08 crash. And they see an opportunity to convert those foreclosures into rental houses. And so some entrepeneurs and some early kind of wildcat investors have seized on that opportunity and are buying hundreds of homes, stretching from California all the way to Florida.
Hobson: Now when I read your story, I sort of didn't know what to think -- whether I should think: Oh good, the market has come up with a way to boost demand in housing; or: Oh no, the speculators are going to destroy the housing market again. What do you think?
Robinson: I mean, I've talked to consumer advocates, and they do like the idea that formerly empty houses are now occupied. And that's kind of good for everybody -- it's good for the community; it stabilizes prices on the block and so forth. That being said, there's a lot of red flags, because speculators come in, you don't know how committed they're going to be to remaining landlords, how much control they're going to have on the occupants. So there's some trepidation too.
Hobson: So is this the kind of thing that is going to have an effect on the overall housing market right now, or is this still kind of a small niche thing that's going on?
Robinson: No, it already is. We see in California housing prices, they are stabilizing in places like San Bernardino county, in the Bay area. We're seeing a similar phenomenon in Phoenix, because investors are becoming buyers. They going in, they're buying up foreclosed housing stock. They're already having an impact on stabilizing prices and taking inventory off the market in those areas.
Hobson: Ed Robinson is senior writer with Bloomberg Markets Magazine. Thanks so much for talking with us.
Robinson: My pleasure.