The stimulus and our real estate problem.

[mmonk]

Here is some of an email I received from the National Association of REALTORS regarding the stimulus (all in all pretty good I think):

Here's our take on the Stimulis Bill and Treasury announcements made this week. We look at the Stimulis package AND the Treasury's package holistically, in compliment with each other - mostly because that's how the Obama team is looking at it. Your representatives, the NAR Board of Directors, asked us in November to do 4 things (with an unspoken but clearly understood mandate to PRESERVE what we already have). Here they are: 1) get loan limits raised for high cost areas, 2) make the $7,500 tax credit NOT a loan, 3) try to find ways to push interest rates down (which are higher than they should be due to systemic risk right now) by 200 basis points, and 4) help provide solutions to the foreclosure/short sale problem.

-snip-

So here's what we have achieved: 1) the loan limits will be raised to $727,000 in high cost areas, 2) the tax credit will be raised to $8,000 with NO payback , 3) interest rates have come down 125-150 basis points, and 4) the bill has over $50 billion in it for foreclosure mitigation, with Geitners Treasury plan signaling that the second half of TARP and TALF will be used to mitigate foreclosures through a government guarantee, drive down interest rates by buying another $200-300 billion of mortgage paper from the GSES's thereby freeing them up to do the same with new mortgages, and Fannie has just agreed to lift the cap of 4 investment properties eligible for loans and raise it to 10.

-snip-

In addition, we preserved what we have - which some tend to forget is always on the table when these negotiations start up again - mortgage interest deductability, real estate tax deductability, and the $250,000/$500,000 cap gains exclusion (an overall package worth more than $100 billion and for some a very attractive funding source for their pet projects).

-snip-

We did make a run at the $15,000 credit -- and we would have loved to have gotten that or the Homebuilders $22,000 credit idea as well as their 5 year loss carryback deal, but they were considered too rich for this program. What it did do though is totally take the debate off of whether a tax credit should be reinstated at all (it expired last year) and whether it was a true credit or a repayable loan, and kept the conversation on how much it should be. It also kept the debate off of 'what we are willing to give up to get a $15,000 tax credit' and kept the debate again, on how much it should be. It's pretty hard to complain when they give you what you ask for and you lose something you never had.

(end)



Hopefully it will help end the housing crisis and get construction moving again which always tends to be a foundation to economic recovery. This combined with money to the states to provide funds while the tax base suffers can keep spending projects on the local level keep going because contraction of spending right now is what we don't want to happen.

[ayeshahaqqiqa]

1. Thanks for the report

realtors are often conservatives (at least around here), so it is nice to see something from their National Board that is positive about what Obama is doing. Now maybe my co-worker will finally be able to sell her house and move into the one she wants to buy!

[mmonk]

3. You're welcome. Many positives in this bill (more than I expected

with the Republican and Blue Dog resistance to it).

[KharmaTrain]

2. Now To Get The Banks To Cooperate...

There still needs to be a rewrite of bankruptcy legislation...capping interest rates, preventing more of these "time bombs" where rates reset and force banks to not just renegotiate forclosed or mortgages in trouble of going under, but other debts as well. Then the banks need to either get rid of or isolate their bad debt...make them solvent enough to feel confident in loaning. If they feel they're going to need the stimulus money to cover assets, it won't be going out on loans.

Overall, a very nice report from the NAR...it does spell out some critical elements in the bill that people don't see and will go a long way once the economy recovers...but without defusing all the debt, the credit markets will remain frozen.

Cheers...

[FreakinDJ]

5. The Banks will be resistent because they have to report risk

How it got to the point Banks were allowed to keep "Off Book Risk" only a "Trickle Down Freeptard" can say, but having a thorough reporting will go a long way to restoring our financial institutions

[KharmaTrain]

6. Phil Gramm...

Just imagine if this shitstain were at the helm of the Treasury. :scared:

Or Gramps second choice...John "35k commode" Thain.

You know the banks and financial world are dreading having their books really looked at. All we see right now is the fall out of their frivolous ways along with over a decade of little or no government regulation. When the real story comes out it won't be pretty. But, as you say, it has to be done if the financial markets are every to gain any credibility and people feel confident to invest again.

Cheers...

[mmonk]

13. Good 'ol Gramm fired the bullet that led to disaster.

The infamous Gramm-Leach-Bliley Act of Nov. 12th 1999.

http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=106_cong_public_laws&docid=f:publ102.106

[KharmaTrain]

29. Quit Yer Whinning...

My loathing for this scum goes back to the 80's. And to think he once was a Democrat.

Cheers...

[mmonk]

31. Not whining, just stating his contribution.

He, I guess, is what one would call a Reagan Democrat since he once stunk up our party.

[FreakinDJ]

26. I think the "Phil Gramm adviser" is what ended McLame's run

For the average American who rarely if ever looks into the details of American politics, the Phil Gramm = Enron Loop Hole = Banking Deregulation was easy to understand and comprehend the dangers of letting him near the White House

[MadHound]

4. Ah yes, the NAR, wanting to pump that housing buble up again by any means possible

The trouble is if you pump that bubble up again, it will simply crash even worse than before just a few years down the road. Sorry, but in many areas the housing market was truly over valued and needed a correction. In the long run that correction will be of more value than these artificial inflations followed by catastrophic bursts.

Furthermore this will just encourage developers to keep expanding their madness onto more pristine and agricultural land. One silver lining in this downturn is that developers stopped bulldozing forests and meadows, this sort of thing could very well start it up again.

[mmonk]

7. Bad guys everywhere, right?

So you like where we are now? You want no stabilization? No spending?

[MadHound]

15. Now I didn't say that, did I?

What I did say is that I don't want to seeing the housing bubble to be re-inflated, only to have it collapse in just a few years.

What amazes me is that people around here, and out in the real world also, were complaining about high housing prices were a year ago, how it was preventing people from getting into houses because the price was too high and the property was overvalued.

Well, the property isn't so nearly over valued, and people can afford to buy houses again. Yet here we have people like the NAR and yourself wanting to pump up the housing bubble again. What do you have against affordable housing? Or are you simply wanting to have your cake and eat it too?

[we can do it]

19. How Are You Equating People Buying with "Pumping Up the Bubble"?

and deflation is even worse than stagnation.....your pay for example will go down even further, and if you have debt, it will not.....

[MadHound]

23. From this quote

"Hopefully it will help end the housing crisis and get construction moving again which always tends to be a foundation to economic recovery."

Sorry, but I've watched the NAR cheering on the housing bubble for the past ten years, along with developers and construction crews. This has resulted in this housing bubble, a huge housing glut in many areas, and tens of thousands of pristine land put under concrete in order that these three groups could make obscene amounts of money.

Pardon me if you think that I'm over-reacting, but given their respective track records it seems to me that the NAR are chomping at the bit for a return to the days of house flipping and over-inflated values.

As far as the construction industry goes, well they're going to have to live with the fact that in many areas they're in a contracted market due to over building. I live in the middle of Missouri, and even though we've be fairly insulated from the housing madness, yet a nearby city has built ten percent beyond current capacity, meaning that even before the bust we had a lot of empty houses(and this is a college town). This is the sort of thing that we don't need to go back to, yet it seems to me, and yes I could be misreading this, that the NAR and others want to return to that sort of madness. That would be the worst thing we could do.

As far as housing prices go, well we're all going to have to suck it up on that one.

[we can do it]

27. Infer Much?

Realtors do not set home prices. Home sellers set the price. GREED caused the bubble - not realtors. (Though SOME realtors are greedy).Greedy people had to buy all kinds of junk paid for by 2nd and 3rd mortgages (not all people who are in financial trouble). Greedy bankers sold unrealistic mortgages (not all mortage officers are greedy). Too many people thought they could get rich quick and too many people cast blame without thinking it through.

[mmonk]

30. Something to consider.

By my words, I was saying a stable but steadily increasing in value housing market has been a tool of government to ease recessions creating a soft landing and a quicker recovery. The problem with just letting it be in free fall and say oh well, let it fall, it's everybody's fault who is in the housing industry is the way to prolong our overall problem. The creation by Wall Street of investment banks "too large to fail" and the deregulation by politicians to help create these entities and unsecured mortgage securities is where the heart of the problem was created. When housing falls too far in value, unsold new construction stock causes more than just reduced pricing, they cause general contractors to go under and thus wholesalers in building products, plumbing supplies, electrical supplies, carpenters, plumbers, electricians, brick masons, real estate agents, building products manufacturers and the like. It's a sharp ripple that puts many people out of work and slows down the economy as a whole.

[we can do it]

8. You Do Realize People Need a Place To Live and Jobs

A lot of jobs depend on housing and people buy homes to live in. Prices are down, interest is down. Everyone's situation changes from time to time the want a bigger or smaller home. (I am against the deforestation - I like seeing people move into existing homes close to or in town)

[mmonk]

9. Not to mention that many people don't have large stock portfolios

and when housing values collapse, they lose most of their household wealth. If we put more money again in section 8 housing, we can get people out of living in their cars and into adequate housing as well.

[we can do it]

10. Thanks for Saying What I Was Thinking

There are those of us who have paid for our homes in a timely manner, have worked hard for our communities, fought for change...and we have people supposedly on our side hoping the value of our homes and communities fall, I just don't get it......

[blondeatlast]

12. The people next door to us walked away from their mortgage 2 weeks

ago. It may be months before the bank forecloses; in the meantime, the house is unkempt, the yard looks awful (I've been cleaning up the front as much as I can) and it is driving the value of my home down even further than it already was.

A glut of vacant, rotting housing doesn't help homeowners, banks, or cities. We need to start helping people from the bottom up because that helps even my comfortable way of life.

[MadHound]

18. Well d'uh, of course I do

But explain to me how pumping up that housing bubble again, with the accompanying rise in prices, is going to make it more affordable for people to buy a house. A year ago people were screaming about how prices were out of reach for the normal person, how housing was over valued. But now that housing prices have returned to approximately their realistic value, people are wanting to pump up that housing bubble once again and make prices unaffordable.

And frankly, the housing bubble caused a glut of housing on the market in many, many areas. What, you want developers and construction crews building even more houses in glutted markets just so they can have jobs? That's a sure recipie for another housing crash in just a few years, not to mention the fact such meaningless development and construction projects will eat up more and more land.

You can't have your cake and eat it too, and in the aftermath of any bubble there is a necessary, and yes quite painful contraction. However that is a better alternative than having an economy of serial bubbles, inflating and bursting every few years. In fact that's part of our problem now, the economy of the past fifteen years has been based on serial bubbles. When the tech bubble burst, Greenspan lowered interest rates in order to create a housing bubble, which mitigated the worst of the tech bubble bursting. However we're paying the price now for that and as you see, it isn't pretty. Trying to do the same thing again would just make it all that much worse a few years down the line.

[we can do it]

21. Please Explain How People Buying Homes (Especially Foreclosed Homes)

at prices way lower than the early 2000's is reinflating anything?

[MadHound]

24. That's not what I'm talking about

I'm criticizing the NAR for cheering on the stimulus, and from other sources besides yours, they're wanting more, more, more, wanting the prices to return to pre-bust levels, and doing their level best to bring that about. This is what I've seen the NAR and others trying to achieve.

[we can do it]

28. How About Showing Those "Sources"

[mmonk]

32. They want the market to stabilize and actvity to resume.

NAR is for affordable housing. It is for housing for everyone.

[mmonk]

25. Agents react rather than cause. The cause was deregulation

of the financial industry, creating the investment banks "too big to fail", the credit swaps, and unsecured mortgage securities.

[blondeatlast]

11. Sure--let's just let more folks get thrown out of their houses instead.

The only BAD decision to be made here is to just let things continue as they are.

New Flash: Real estate people are not enjoying this any more than any one else--and most saw this coming and were warining of it 2 years ago.

[MadHound]

14. I'm not saying for folks to get thrown out of their houses

Nor am I saying let things continue the way they are. What I am saying is that we shouldn't be trying to reinflate the housing bubble, only to have it collapse again, worse than ever, a few years down the road.

[mmonk]

16. Right now we need stabilization.

Over inflated housing doesn't really help REALTORS in the long run either. It usually signals a slow down or worse, something like we have now. Reregulation + stabilization + stimulus will help us get out of this situation. The stimulus will be revisited.

[we can do it]

17. My Dear, No One Is Suggesting That

If someone has been waiting to buy a home because the prices were too high, in most places they have come back to earth and with low interest rates and the tax credit, they now have a chance to own instead of renting, (if they are employed).....

[Bluenorthwest]

20. The credit is not a loan, ok

but is it a refundable credit? That I have not read one way or the other thus far.

[we can do it]

22. It Was Refundable, But Not Sure Exactly How Its Ended Up In the New Version