The big story in this article in the Times is that the CBO has estimated that Freddie and Fannie could end up costing taxpayers as much as $389 billion. But the interesting side story is that the obsession with homeownership has not subsided despite history recently providing us with an important lesson in the costs of homeownership and homeownership encouraging policies. Community groups are pushing Fannie and Freddie to work at getting homeowners rather than investors to buy their foreclosed properties, and apparently they are succeeding:

Executives at both Fannie and Freddie say they have an overriding obligation to limit losses, but that they are taking steps to sell more homes to families.

Fannie Mae last summer announced that it would give people seeking homes a “first look” by not accepting offers from investors in the first 15 days that a property is on the market. It also offers to help buyers with closing costs, and prohibits buyers from reselling properties at a profit for 90 days, to discourage speculation.

This seems incredibly misguided to me. If preventing investors from bidding in the first 15 days means the house is selling for less than it otherwise would, than this policy is depressing house prices in the areas that most need house price appreciation. In addition, preventing investors from selling in 90 days is really an attempt to prevent arbitrage, which again will depress prices.

It strikes me as ludicrous that as we are finding out we may have a $389 billion bill for our past efforts to encourage homeownership, people want to restrict investment in real estate right just when it is needed most in service to more homeownership.

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