Housing Relief – Stop It!

I’ve been saying since the housing crisis started the government needs to get the hell out of the way and let the market play out naturally. Any time they come up with some crazy program it has unintended consequences that cause equally or greater problems in the housing market.

The solution to the economy is not a government “fix” of the housing market but to create an environment with less taxation and regulation that will promote job growth. Here is a fantastic artticle from Linkedin that sums it up beautifully.

Oh, boy.  We know there’s trouble when NAR not only requested, but is now planning to host a Housing Summit in DC, scheduled for October. Business, economist, and policy making type people should be in attendance. The point? To find a solution to the housing industry disaster.

Attempt one: tax credits

The things that have been tried (some with a modicum of success, others, not so much), haven’t exactly done a whole lot to fix the housing mess. We had the First Time Buyer Credit, which also could apply to move-up buyers. While it increased the amount of sales for a time, it didn’t exactly affect values. Most people just bought sooner than they would have, and there was a slight increase in sales prices, due to well, eight grand being tagged onto asking prices. 

Attempt two: loan mods

There have been both Government and individual bank programs for loan mods, in which interest rates, principle, and missed payments could all be reduced. Also included with the loan mods are programs for the unemployed and underemployed, initiatives to streamline short sales, and billions of dollars for states that are “hardest hit.” 

While millions and millions of owners have not been helped as promised when bank and government sponsored programs rolled out, a fair amount of people are at least getting modifications. However, they are also redefaulting at an alarming rate. Interest rates themselves are, wait for it… at historic lows (I hate this term more than lima beans, and I really hate lima beans). Even if they weren’t super low, this isn’t the early ‘80’s after all. Anything under ten percent is awesome. 

Attempt three: government programs

Fannie, Freddie, and other banks even had foreclosure moratoriums. True, some were due to the robo-signing fiasco, but there was a good period a couple of years ago where many were self-imposed. Of course there was TARP, which, well, what was the point of that? So that banks wouldn’t fold, and they’d have capital to lend? How’d that work out again? 

We also have new departments in the government like the Consumer Financial Protection Bureau and a boatload of new rules thanks to the Dodd-Frank Bill. Since most of these have either just gone into effect or have yet to begin, it’s too soon to say what will come of them. A lot of different policies and programs have been attempted.  Overall, the success rate has been dismal. 

Fresh, new ideas

Some of the new, and fresh ideas (sarcasm much?) bouncing around, are Fannie/Freddie REOs being turned into rentals, mass refinancing for loans backed by Fannie/Freddie, extending jumbo loan-limits, flood insurance, and let’s not forget the ever popular, but rarely done, principle write-downs for those filing bankruptcy, or for those who are underwater. 

Are there any other innovative ideas that (1) will come out of a NAR Housing Summit, and (2) not suck? My vote is no. As many of us at AGBeat has long noted, this isn’t a housing problem, it’s a jobs problem. If a borrower or homeowner has little income or is on unemployment, if their credit scores are in the tank, they have zero dollars for a down payment, and their prospects for the future are bleak, who in their right mind would lend them money to buy or re-fi a house?

The real answer:

Listen, I’m no economist, hell, I almost failed the same math class with the same teacher- twice. Obviously, I’m not involved in huge, mega business decisions that affect thousands of people, or schmoozing with the Feds to implement or change policy, either, but I have spent my entire life around real estate. Developing some new, crazy, housing policies is not the way to go. Please, Powers That Be, let the freaking dust fall where it may, and stay out of it. Stop trying to fix housing with the theory that stabilizing it will result in a magic pill for the economy at large.   

Please, PTB, instead of a Housing Summit, try a Job Summit. Actually, just call it a meeting, a gathering, a pow-wow- anything but a Summit. And try inviting real, everyday people, too, not just dudes in suits- who knows, ideas like this may come up? We could try throwing bucks at those who can, and want to go to school to improve their current credentials, or train for new careers. Instead of wasting cash on repaving roads that don’t need it (yeah this happened right down the street from us), money could be invested in the tech and medical fields to create and open up more opportunities. Grants could be given to cities that would allow them to re-hire teachers, safety forces, and admin people. And while I’m not huge on tax breaks for all, we need to make the working environment just a tad friendlier in states that have outrageous rates for both employees, and business owners.

A Housing Summit is so not needed. It’s a waste of time and resources. Fix the job problem, and the whole housing thing will fix itself.

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