real estate trends
Can the 2008 Housing Act Stabilize and Turn the Real Estate Cycle Around?
Who would have only 5 years ago expected that we would be staring down such complex and turbulent times in real estate?
Last week, President George Bush signed The American Housing Rescue and Foreclosure Prevention Act of 2008 (the Housing Act) into law. It is the most sweeping housing legislation since the Great Depression. The new Act authorizes the Department of the Treasury to stem the tide of home foreclosures and provide a lifeline to mortgage lenders. With inventory in many large cities sitting at almost a one year level, and foreclosures expected to surpass 6 million by 2012, they have a huge task ahead.
1. $300 billion in FHA loans for Homeowners to Refinance
The Act could avoid foreclosure through refinancing into lower-cost mortgages insured by the Federal Housing Administration (FHA).
THE GOOD NEWS: It will help an anticipated 400,000 people whose loan servicers are willing to accept a write-down on principal.
REALITY: To qualify, borrowers must have a relatively high level of debt to income, use their homes as primary residences and agree to share any profits from any eventual resale with the government.
2. $4 billion to Buy and Rehab Foreclosed Homes
CLIFF NOTES: The Act offers $4 billion for local communities to buy homes at a discount, rehabilitate them, sell them and use profits for neighborhood development.
THE GOOD NEWS: This could help many low- and moderate-income families in holding on to the American Dream.
REALITY: Should reduce crime, especially in the inner city and low income areas.
3. New Home Buyer Tax Credit of up to $7,500 for Qualified Buyers
CLIFF NOTES: It’s not really a credit but really a loan.
THE GOOD NEWS: It’s refundable credit and it’s a zero-percent loan. An estimated 3 million buyers could be eligible for the tax credit.
REALITY: You got to pay it back.
4. New Deductions for Real Property Taxes
CLIFF NOTES: New deductions, in addition to the existing standard deductions.
THE GOOD NEWS: It’s effective immediately.
REALITY: These are Ã¢â‚¬Å“above the lineÃ¢â‚¬Â deductions.
5. Change in Vacation-home Status
CLIFF NOTES: The personal resident exclusion is still good on your personal home but not on your vacation home or rental property converted to a home.
THE GOOD NEWS: It’s effective until Jan. 1, 2009 so you still have time.
REALITY: The decade-long free ride is over.
So is this a real rescue of the real estate and mortgage markets or only a bandage to help us through till we have a new President next year? What do you think?
real estate trends
When the economy did poorly, real estate introduced wealth.
When 911 all but destroyed our faith, real estate restored the American Dream.
In many occasions, and in many years, real estate has been the rock to depend, or in some cases even the rocket to ride to riches. But times have changed and the bright years of 2000-2005 have become a dull memory.
It’s not really that real estate itself crashed and burned, but that with new construction out of control, speculation spiraling and lending becoming irresponsible, the burden real estate had to carry became to heavy and the first nail in the coffin ground what was a good thing, to a halt.
Collapsing financial institutions led to immense write offs, allegations and actions of improper conduct led to finger pointing and investigations that in turn led to layoffs and disaster.
With unemployment steadily rising and home prices in a constant month by month decline, the real estate market is brittle and cautiously teetering on which way to go.
With the unprecedented rally of crude oil tethering at $150, and now two government-sponsored entities, Fannie Mae and Freddie Mac possibly requiring government bailout. The pair guarantee around $5 trillion worth of mortgages Ã¢â‚¬â€œ that’s almost half of the $9.5 trillion debt of the United States. I think we have just witnessed the second nail being hammered into the heart of real estate. Not good at all.
Let’s pray and hope that we don’t have a third nail Ã¢â‚¬â€œ a major terrorist attack on local soil in the foreseeable future. Barring the above, the road to real estate recovery is going to be a slow and bumpy one. Most likely it may only pick up momentum during or after 2010 Ã¢â‚¬â€œ especially for areas such as Florida, California and Las Vegas.
So for those of us that earn our daily bread from real estate my message is a simple one: Batten down the hatches, expand your horizons, re-engineer your company, automate your business, market more online Ã¢â‚¬â€œ yes, maximize every opportunity. Survive the years 2006-2010 and come out the other side with an automated, more efficient, new paradigm, consumer focused real estate model and you may very well find yourself in the front row to become the Amazon, EBay or Google of real estate.
This post is also posted in Inman Community under the title: Three Gold Stars and Two Rusty Nails.---------- View Marketing Messages Below ----------