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.
http://www.bloomberg.com/news/2012-04-24/millions-more-u-s-homeowners-to-rent-pimco-s-simon-says.html
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