I tend to be an eternal optimist. I believe the housing market is going to rebound sooner than most people because I believe that most Americans truly want to own a home (or stay in their home). I also believe that we are seeing strong signs of a housing market recovery in many parts of the country. However, I also believe that we could rebound much faster as a nation if our government could act faster to save our economy. Everyone agrees that without a housing recovery, our economy will continue to struggle, so what are we waiting for?
The Impatient Optimist
We hear all of the rhetoric coming from Congress, the Treasury and the White House about stimulating the housing market, but the reality is that the stimulus is taking too long. While Congress and the White House argue about health care reform, millions of Americans are losing their homes and qualified homebuyers are sitting on the sidelines waiting for more incentives. It comes down to simple priorities. The housing market could lead us out of recession or take us deeper into one. Meanwhile, our government is wrapped up in health care reform, which is important to our nation in the long run, but is certainly not critical to our economic recovery.
2 Solutions We Need Yesterday
So the feds already know the solutions, but they seem to be stuck on the back burner. Solution number one: Extend the First Time Homebuyer Tax Credit and extend it to all homebuyers. Experts agree that this is likely to happen eventually, but what are we waiting for? The current tax credit ends in November and nobody wants to buy a house now for fear they won’t close in time to get their credit. This makes sense given the time it takes to close a loan in today’s banking system and the high number of short sales that take considerably longer to close.
Solution number two: Provide the banking system with guidelines and incentives for completing more short sales in a timely manner. The average time to complete a short sale is increasing and our banks are getting more overwhelmed every day. This isn’t about a bank bailout, its about helping homeowners and an housing market in need. To date, the government’s housing recovery program is falling very short of expectations. Loan modifications are just a band aid and the bank departments that handle them are just a waste of time and money for those homeowners who need real solutions like a streamlined short sale process. The Foreclosure Alternatives Program (FAP) which was announced in May, promised details on short sale guidelines and incentives in late July, and is now 6 weeks late on that promise. Do we have to wait for health care reform to pass before we see FAP in action?
As if not doing anything isn’t bad enough, the latest out of our Congressional Budget Office is that they are considering reducing the mortgage interest deduction from $1.1m to $500k. I don’t have to tell you what this will do to our higher end real estate market which is already in big trouble. We already have over 7 years in inventory of $1million plus homes, so why not further discourage buyers in this already troubled market? Trust me, if the high-end market doesn’t get some relief, we are all going to feel the pain. We need incentives, not deterrents!
What Can You Do?
For starters, don’t wait on the feds, go buy a house. This is one of the best times in history to buy. If your credit is good, you can get a 30 year fixed mortgage below 5% and the affordability index is extremely favorable. If you wait for the feds to extend the tax credit, you could lose more than the credit amount on interest rate increases alone (its coming), and here in Denver prices are going up. Can you really afford to wait for Congress to figure out their priorities? After all, isn’t capitalism more about being proactive and taking advantage of the market, not waiting on the government to help us? Go buy a house.