Writing in Bloomberg View, Ed Glaeser argues, among other things, that the GSEs should wait to sell the stock of housing they own slowly:
Exploring options makes sense, because selling homes too quickly means low prices, especially if you are trying to move thousands of foreclosed homes at once. Yet the government needs to be quite careful here as well, because renting homes that were meant to be owned is never easy.
The case for slow sales was made in a classic paper by David Genesove and Chris Mayer, which found that Boston condominium sellers with high loan-to-equity levels sold their units more slowly and got substantially higher prices. Steve Levitt and Chad Syverson found that real estate agents, who presumably know more about housing markets than ordinary sellers, typically take 9.5 days longer to sell their homes and receive 3.7 percent higher prices, holding everything else constant.
In a frictionless, efficient market for a commodity good the government could not expect to make money by holding on to the houses and renting them since the net present value of the returns to renting for a year and then selling would be equal to the price they could get for the houses today. Glaeser cites Genesove and Mayer as providing justification for why this might not be the case. However, it is my recollection of this paper that the way that a home seller increases the sale price by waiting is through housing being in a matching market. In this kind of market, the seller gets a higher price by waiting for a better matched buyer. The problem here is that in a matching market you presumably find a better buyer by having the house on the market for longer, not simply by waiting until a later date to sell it. If I recall correctly, this is what Genesove and Mayer argue. In this case, Glaeser’s argument for renting and waiting to sell -at least as justified by the matching market- does not hold.
One could still argue that the optimal sale time of a stock of houses is slow based on the literature on forced sales, which Glaeser also cites. So this is not to say the rental idea is not a good one relative to quickly dumping all the houses onto the market, just that one should caution against interpreting the literature for time-on-the-market as applying to units which are being rented, and thus are not in fact on the market.