A floor in housing prices can only be set by home buyers. With housing affordability at the best level it’s been at in 25 years – now would seem like a great time to buy. 

Programs like Fannie Mae’s “First Look Program” appear successful at creating an “act now” incentive for tentative homebuyers who are looking to lock in discount prices on REOs. The addition of down payment assistance and closing cost credits help qualified homebuyers overcome the real and perceived  financial barriers to buying a home. 

Furthermore, the average discount attributed to an REO sale compared to a comparable non-distressed sale is over 30%. If we were to use the“First Look” formula that FHA imposes on bidders – “as much as” 10% off of the appraised value – lenders and insurers would experience just a third of the losses than can expect under open market conditions.

In other words, anecdotal evidence suggests that homes in these programs are selling faster, at higher price, and (bonus) to mainly owner occupants.