Morgan Stanley researchers map out new housing plan

Morgan Stanley analysts recently released a paper outlining ways to fix the housing market. In an interview with the LA Times, the analysts addressed how the oversupply of homes and low housing prices are putting the housing market on an unsustainable path.

According to the analysts, tight mortgage restrictions are preventing home sales, rising rents are pushing people out of the market and defaulting borrowers are losing their homes to foreclosure. This is creating an backlog of homes and a scarcity of buyers that drives down home prices across the industry. The analysts believe eliminating the excess housing is the first step to stabilizing the market.

The analysts' plan is to collaborate with investors by offering them incentives, such as a tax benefit, and access to foreclosure inventory if they agree to upgrade the distressed properties and offer flexible terms to renters. The analysts agree with the Obama administration's option to sell foreclosed property in bulk to investors in order to clear up the oversupply of homes quickly.

In a statement from the federal government regarding its request for information on the new housing plans, Department of Housing and Urban Development Secretary Shaun Donovan said that working with investors to improve rental properties and clear out foreclosures is a vital step to stabilizing the market.

"Half of all renters are spending more than a third of their income on housing and a quarter spending more than half," Donovan said. "We have to find and promote new ways to alleviate the strain on the affordable rental market." 

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