More than 85% of the properties included in Fannie Mae's first REO rental pilot program are already teneted, Barclays Capital analysts reported in their latest securitization report.
With the majority of the properties taken up, the program is set to come through. However, Barclays analysts predict only a modest overall effect on the housing market. This is because of the program's concentration to only certain pockets of the U.S. housing market.
"Relatively modest rental yields at the national level and the onerous operational logistics of managing REO homes spread across regions will likely keep the positive effects of the program limited to regions such as Phoenix, Chicago, and parts of California/Florida," according to the report.
There is also good news outside of the Fannie Mae program. REO rental properties that fall outside of the scheme have seen some good interest, according to data reported by Memphis Invest. The company is a provider of single-family rental real estate investment services and, and based on its data, 1Q12 activity showed a 67% year-over-year increase in the number of homes sold to investors.
The company sold 99 homes in 1Q12, compared to 59 homes sold in 1Q11. The report also showed that of those 99 homes purchased by investors, 82% were real estate owned (REO) properties. Currently, REO properties comprise 85% of the company’s total inventory.
The activity in the sector, the company said in a press report, reflects continued growth in the REO-to-rental market "that has become increasingly attractive for individual investors looking to capitalize on the distressed housing market and the increase in demand for single-family rentals."
Memphis Invest places tenants in the home and manages tenant relations on an ongoing basis for its investors. It currently manages over 1,000 properties in Memphis and Dallas – 97% of whom reside outside Tennessee and Texas.
So far in 2012 the company is purchasing an average of 35 homes per month, up from an average of 27 homes purchased per month last year.