Early Christmas for real estate industry
Months of dire warnings from the National Association of Realtors and other real estate lobby groups appear to be paying off.
Uncle Sam will keep propping up the still shaky real estate market for months to come under a slew of proposals advancing in Congress.
The most obvious are plans, now gaining momentum, to extend the first-time home buyer tax credit.
While the credit has had its share of critics, a proposal winding its way through the Senate would not only extend it into the spring, but would also expand it as well.
But amid the debate over the credit, Congress has also sped along two other darlings of the real estate industry.
One would prevent higher limits on jumbo loans from expiring, while the other would gut tough new appraisal standards real estate brokers contend have been killing sales.
Without fanfare, Congress late last month agreed to extend the higher jumbo limits, keeping the ceiling at $729,750. The top limit had been poised to drop to $625,500 Jan. 1.
That should help keep alive the budding revival in the hard-hit jumbo market, though it also adds more high-end loans to the already strained portfolios of Freddie and Fannie.
A bipartisan amendment, also passed in October, would require the new chief of the proposed Consumer Financial Protection Agency to replace controversial new regulations on appraisals.
The aim of the new rules was to prevent the epidemic of inflated appraisals that helped inflate prices during the bubble years. Real estate brokers and industry groups, however, have blamed the regs for killing deals.
Of course, the biggest present of all is the tax credit package, still being packaged and wrapped in Congress.
Under the Senate proposal, trader uppers, not just first-time buyers, would also get the credit. Income eligibility would also be boosted significantly as well.
Sarcasm aside, extending the credit and keeping the higher jumbo limits in place, though costly, makes more sense than the alternative.
Forcing the still recovering recovering real estate market to go cold turkey would seem a recipe for disaster at this point.
But it certainly also points to the lobbying power of the real estate industry.
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"Propping up" shaky real estate markets equals keeping home prices high for the average American. The credit does nothing but subsidize the commissions a real estate agent earns. Currently, most people cannot fathom the truth that real estate is worth less than a few years ago. How long will the boondoggle continue? I'm sure the NAR, NAHB, etc. will be screaming that the home buyer credit needs to be extended EVEN longer right after this one gets passed through. Yes, the lobbying groups are powerful and they ARE protecting the interests of their members. However, as average Americans, it's incumbent upon us to realize that these measures are NOT good for our country in the long-term. People receiving the $8k for the "privilege" of going deeply in debt to buy a home think they are getting something for nothing. They are NOT. Someone has to pay for it: other taxpayers right now, or more likely, themselves, their children or their grandchildren in the future.
"Dire warnings" from The NAR? I thought the real estate market had hit bottom and "stabilized." I guess it depends on which side of their mouth they are talking out of.
HCF, i agree completely, but you must realize that most people are uneducated/ignorant of the consequences of the actions of the current government. They watch TV, and vote based on what the media tells them. If everyone cared about actual topics and politics, we probably wouldn't have 2 parties and would have a lot more constructive and efficient government.
Since going cold turkey would be "a recipe for disaster", what is expanding the credit? Utterly moronic? This is like telling someone with a pack a day habit that since quitting smoking is difficult, that the best measure is to expand their addiction to two packs a day.
When are we going to quit?
I know the answer: never. This credit is going to become the next little AMT - getting renewed at the last minute every single time with grandiose promises of overhaul but nothing ever getting done. If this credit ever gets taken away (likely never) - it will be that much more painful.
Last I checked, the conforming limit on jumbos in the Boston area was $465,750-- not even close to the maximum $729,750 that exists in some other parts of the country. Now compare this with the $800-1MM or greater median home prices in the more expensive Boston suburbs.
It's obvious most people who buy in Boston's better suburbs will need to qualify for a non-government subsidized jumbo loan. If that's you, then get your 25-35% down payment together now, and prepare for APR's in the 6.5% - 7.5% range. Hope your credit is excellent too.
As I have said many times, prices in Boston's more expensive markets will continue to plummet regardless of whether this horrendously expensive and poorly-targeted tax credit subsidy is extended.
sounds like it won't be a very good xmas for U.S. taxpayers...
Although the FHA has tightened credit standards, many of the 2007 and early 2008 mortgages are going bad. The agency expects defaults on 24% of all loans insured in 2007, and 20% of those backed in 2008. "The orders from Congress and us were clear: We want to save as many families as we can, recognizing that a lot of loans people were looking to refinance out of should never have been made in the first place," said Brian Montgomery, who served as the agency's commissioner for four years ending in July.
Hide yoru wallets!
Thnnks for nothing, Uncle Sam. This sweater is ugly and fits horribly . . . Maybe if they'd never instituted this horrible program in the first place prices would have tanked long ago, the bottom would have come and gone and prices would now actually be more affordable, stable and real housing recovery would be underway. Certainly this is what my wife and I were hoping for. Instead, this debacle continues as does the dearth of decent "first homes." Our landlord has decided to sell our place so we're renting again--something I was ready to be done with. I think this program has certainly had an effect on prices, volume and bringing demand forward. Its certainly affected us. Who do I talk to about getting a check for the government to cover first, last, security, broker fee, and movers? I don't even need $8K. $5K should about cover it . . . . The can kicking is getting really tiresome.
"Forcing the still recovering recovering real estate market to go cold turkey would seem a recipe for disaster at this point."
Scott, could you explain your reasoning for how this would be a recipe for disaster? Disaster for whom?
I will be surprised if the FHA survives another 6 months without a bailout... Same for the FDIC.
As I have said many times on this blog, the credit crisis is nowhere near finished.
"The aim of the new rules was to prevent the epidemic of inflated appraisals that helped inflate prices during the bubble years."
The aim of the tax credit, high jumbo loan limits and all the other stimulus is to inflate home prices. You can't blame appraisals on one hand and then agree with the need for stimulus on the other hand.
"As I have said many times on this blog, the credit crisis is nowhere near finished."
Ain't that the truth. I certainly don't want to be in the blast zone when the bailout bubble bursts.
One has to wonder if any facet of the economy can function without stimulus? The real estate market needs tax credits, foreclosure moratoriums and the FED to purchase MBSs. The financial industry needs bailouts and mark to fantasy accounting. The auto industry needs cash for clunkers. The home improvement industry needs cash for appliances. There's even cash for golf carts (seriously, Google it).
Bobby, few of those things are stimulus. Artificial support for asset bubbles is not stimulus. Sales of existing home are not stimulative. They do not even contribute to the GDP, unlike sales of new homes.
Everyone seems to have forgotten what a stimulus is, including the government. A stimulus is supposed to prime the pump--increase demand, and thus, the velocity of money, during a liquidity trap. It's like getting a car up an icy hill far enough so that it can overtop and descend the other side under its own power.
What we have instead is life support, mostly for things that deserve to die, and will die soon, despite intubation.
Speaking of intubation, the FHA just declared an emergency moratorium on releasing its own statement of financial condition. Obviously it is bankrupt and will require a bailout. As Scott would say, Why not give more subprime loans to people who can't repay them?
Granted I live in a modestly priced real estate market (Maine), but sales for the last 30 days are up 20.48% over the same period last year, and are on par with the pre-boom years 1997 to 2002. My guess is the combination of 20-25% price reductions, favorable interest rates, and the first-time buyer tax credit are contributing to the beginning of a housing recovery here.
The extension and expanded tax credit being debated in Congress will challenge traditional buyer and seller thinking. Will consumers shop for homes (and perhaps qualify for the credit before April 30), during the upcoming Holiday period, the dark and cold winter months, and mud season?
Now you can add the Dead for Lease Program to the mix. Unbelievable!
"Fannie Mae to Rent Foreclosed Homes Back to Borrowers
By NICK TIMIRAOS
Fannie Mae plans to allow homeowners facing foreclosure to stay in their homes and rent them for up to one year as part of the latest effort to help troubled borrowers while keeping a glut of foreclosed properties from hitting the housing market.
The Deed for Lease Program, which Fannie plans to roll out on Thursday, will offer borrowers who fail to complete or don't qualify for a loan modification or other workout to deed their property to the lender in exchange for a lease. Borrowers-turned-tenants will be able to sign leases of up to 12 months and will pay market rents, which in most cases are lower than the cost of mortgage payments."
I live in Maine also (Portland). Sales may have ticked up recently, but listing prices and transaction prices are lower and lower, year over year, month over month. The market here is going nowhere but down...
This blogger might want to review your comment before posting it.
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