By Peter Ricci
The REO inventory for Freddie Mac is down 30 percent from its 2010 peak, according to new data from the GSE.
Chris Bowden, the vice president of Freddie Mac’s HomeSteps unit, said at HousingWire’s REperform Summit in Dallas that Freddie’s REO inventory is now at roughly 53,000 units, a decline of more than 20,000 from its peak of 75,000 in 2010.
Freddie Mac REO Inventory – Gradually Winding Down
The decline in Freddie’s REO inventory, Bowden explained, has been due to strong demand from buyers for inexpensive REO properties; as we just covered, housing investors have been a busy bunch in recent months, with 28.1 million Americans describing themselves as investors and 22 percent of all existing-home purchases from 2003 to 2011 going to investors.
Also influential has been Freddie’s Servicing Alignment Initiative, a program that, according to Ty Miller, Freddie’s vice president of servicer relationships and performance, works closely with borrowers and servicers at the earliest possible stages of the default process to avoid any lingering vacant properties on the market.
“We are collaborative and transparent with them,” Miller said. “We put a lot of emphasis on early intervention with the borrowers.”
Benefits of REO Inventory Declines
The positive outcomes of declining REO inventories are numerous. For one, home prices will respond positively. Not only is there a negative psychology to vacant, boarded-up housing (which, as any agent knows, can hurt the value of nearby properties), the fewer REO properties that are around, the fewer that appraisers will use as comps in home appraisals.
Also, neighborhoods will become safer; squatters are notorious for staking out vacant properties, but in urban areas especially, some shady characters can live in vacant, REO properties, and clearing out those units will eliminate those possibilities as well.
And progress is certainly being made. As Frank Nothaft, Freddie’s chief economist, noted in a recent report, the number of excess vacant homes for sale in the U.S. has fallen by 30 percent from 2008.