Proposal to bulk sell REO could hurt home prices: Radar Logic (by KERRI PANCHUK)

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Thursday, August 25th, 2011, 3:00 pm

At least one housing analyst is pushing back against a government proposal to dispose of the government's real-estate owned properties through bulk sales to investors.

Quinn Eddins, director of research at data firm Radar Logic, concluded in the latest RPX Monthly Housing Market Report that housing remains a drag on the economy and home price stability could be negatively impacted by the Fed's proposed REO-disposition plan to sell  Fannie Mae,Freddie Mac and other government-held inventory in bulk.  The RPX Composite price index, which tracks home values in 25 metro areas, showed a 4.7% drop year-over-year in June.

Eddins said analysts are concerned about the Fed's proposal to cut down on the number of government-owned distressed properties by allowing  investors to buy these REOs in bulk for the purpose of turning them into rentals.

"Unless careful steps are taken to prevent it, we fear that bulk sales of REO properties could have an adverse effect on the appraised values of homes, and therefore home sales," the RPX monthly report warned.

Eddins believes a bulk sale could result in markets with a large number of low-priced homes with "misleadingly low appraisals" on REO properties — skewing home prices across the board.

"The low appraisals could then scuttle home sales that do not involve REO properties," Eddins wrote. "Even if local appraisers do not use the bulk-sale properties as comps, there are many automated valuation models that would likely incorporate the prices of those properties unless there was some way to designate them as bulk-sale properties. This issue should be taken into consideration by anyone trying to implement a bulk-sale program."

The report goes on to say bulk sales will likely result in the GSEs recording losses on the REO properties when comparing the sale amount to the principal on the defaulted loan. "We believe these losses, which will ultimately be passed to taxpayers, could be huge," Radar Logic said.

Instead of going the route of selling the properties to investors, the RPX report recommends the Federal Housing Finance Agency focus on restructuring delinquent or distressed loans to cut down on the flow of properties to government portfolios.

Eddins says the Fed could then rent out properties from its REO portfolios by working with private-sector property managers.

"We believe our two-pronged strategy will reduce the REO portfolios of the enterprises and the FHA and reduce the oversupply problem currently facing the housing market while avoiding a devastating loss to taxpayers," Eddins writes.

The plan will officially be proposed by Radar Logic next month.

Looking forward, the RPX report said "housing is poised for further weakness," but analysts expect a recovery eventually.

Great Public Schools...

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The biggest investment aside from your home is in your children and their education. Homestead Farm is a neighborhood that allows you to take advantage of great public schools. It all starts at the elementary level, and around here, it starts with a bang.
Lois Lenski Elementary is one of the highest rated elementary schools in not only the state, but the country (the US Department of Education has named it a Blue Ribbon School of Excellence). Along with being academic accolades, Lenski has been awarded the National Library of the Year (2004) from the American Library Association. Lenski also has a phenomenal art program.
So the kids are really starting to look old, and with that comes middle school, and in this case, Isaac Newton Middle School. Newton is a very well rounded school from the music and performing arts programs to math and the sciences. While not a Blue Ribbon School of Excellence, I can speak personally to Newton's prowess (I went there way back when) and curriculum. Science labs, wood/metal shops, physical education and great field trips will help get the kids through the awkward stage of life we call middle school.

They are starting to become young adults, and aside from asking yourself how you got here so quickly is the need to challenge them as such. Arapahoe High School has been doing just that for almost half a century. Also a US Department of Education Blue Ribbon School of Excellence, AHS is one of the best high schools in the nation. Pushing teenagers in every area of academia imaginable (trust me, this is not an exaggeration) principal Ron Booth will get your children as well prepared as possible for college. Arapahoe boasts a graduation rate of over 94%, with a majority of graduates attending secondary education. Arapahoe excels in all areas, especially athletics (numerous state champions and runner-ups), band (multiple international and domestic trips) and in advanced placement classes.

Home is Whenever I'm With You

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We all know that your home doesn't end at the front door. This is another aspect that makes Homestead Farm just that much better. When you make Homestead Farm your home, you are choosing to be part of a community that has been developing for over 30 years.

A short walk from anywhere in the neighborhood are the tennis courts and neighborhood pool. Our tennis courts have been completely resurfaced and leveled within the last five years, providing a great place to let loose in the cool evening after a hard day of work. Right across from the tennis courts is the neighborhood pool, where multiple generations of kids have grown up, by both spending their free time in the afternoon and through the swim team.
Every summer the entire neighborhood rallies around the Mighty Tarpons. Starting at age 4 on the Mini-Tarps, kids are immersed in a great sport from the get-go. From there they progress to the main team at age 7, and then can swim every summer until age 18. Although it always pained me to wake up so early in the summer for practice, I genuinely loved every minute of being a Tarpon. The team is part of the Rocky Mountain Swim League, which means that we compete against a ton of surrounding neighborhoods. Swim team is a great experience for all kids, and speaking as one that moved to Homestead Farm when I was 11, it was a great way to meet the neighborhood and make friends. I would recommend trying out the Mighty Tarpons to everyone.
Seasonal neighborhood events such as the summer kick-off party on Memorial Day, the 4th of July pool party and camping trip and the holiday luminaries and carriage ride provide great opportunities to get together with your neighbors and celebrate. Grilling, beer and good times are in abundance at the pool on both Memorial Day and the 4th. When it comes time to bundle up, the kids love the horse-drawn carriage ride. Set in the evening with all of the neighborhood streets lined with luminaries, cider (and possibly something a bit stronger) and a bon fire keep everyone warm on their throwback trip through the neighborhood.