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Do loan modifications cause rents to rise too? OC Housing News
invite response
2014 Jul 7, 11:32pm 548 views 2 comments
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tatupu70
2014 Jul 8, 12:02am
Loan modifications inflate house prices by reducing for-sale inventory; it
also inflates rents by keeping potential rental homes off the market.
That logic is a bit ridiculous. When homeowners are foreclosed, they typically become renters. If the home is rented immediately, no change in supply/demand dynamic. If the home doesn't get rented for 1 year or so, then rent actually goes UP--more demand, same supply (until the foreclosed house is put back on the market).
So, if anything, not foreclosing keeps rents down.
The problem with any policy that manipulates a financial market is the unforeseen or unintended consequences of their actions. One such consequence is and unsustainable increase in rent.
It'd certainly be nice if unsustainable and ridiculously high rental prices would promptly crash back down to reality.
http://ochousingnews.com/blog/loan-modifications-cause-rents-rise/
Loan modifications inflate house prices by reducing for-sale inventory; it also inflates rents by keeping potential rental homes off the market.
Lenders embarked on a policy of aggressive loan modification to dry up the MLS inventory and force house prices to bottom in order to restore collateral value behind their bad bubble-era loans. Nobody disputes this, not even lenders.
Lenders didn’t have much choice but to pursue this policy because the alternative of curing their bad loans through foreclosure, besides being politically unpalatable, would have bankrupted the banks with trillions of dollars in losses. The problem with any policy that manipulates a financial market is the unforeseen or unintended consequences of their actions. One such consequence is and unsustainable increase in rent.
Source: http://ochousingnews.com/blog/loan-modifications-cause-rents-rise/#ixzz36sqQp2Gj
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