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It’s an era marked by unprecedented government intervention, corporate bankruptcies, rising unemployment, disappearing stock values and personal wealth, a dismal real estate market and state governments running out of money. An era brought on by bad financial decisions, little regulation (if any) in our most vulnerable industries, Bill Clinton’s desire to give all Americans an opportunity at homeownership and the Bush Administrations inability to regulate. In its infancy, this era has seen taxpayer sponsored “bailouts” of $30 billion for Bear Sterns, $200 billion for Freddie Mac and Fannie Mae, $150 billion for A.I.G., $25 billion for more efficient vehicles, $700 billion for the Troubled Asset Relieve Program (TARP), $247.5 billion to Citigroup, and $17.4 billion for Chrysler and G.M. In the coming weeks, the Obama Administration will introduce a new plan estimated to cost as much as $850 billion…can the housing industry win a chunk of that?
Many experts spotted the housing problem years ago and warned our leaders of what could come about. Unfortunately, those experts went unheard and 2008 happened. Experts wanted to address housing issues first, years ago; today, years later, housing may get the assistance it has gone without for too long. Tomorrow, January 7, 2009, home builders, suppliers, manufacturers and real estate professionals from around the nation meet with House and Senate members to discuss the Fix Housing First Proposal and lobby for its inclusion in the Obama Administration’s economic stimulus plan. Housing experts believe that the plan will stimulate demand, help decrease supply, curb foreclosures, stabilize home prices and enhance the effect of recent stimulus efforts.
Stolen from the Fix Housing First Proposal
The Fix Housing First Proposal presents an inclusive solution that ultimately makes new homes more affordable and home ownership more attractive by proposing to increase tax incentives, introduce clearer legislation and create low interest rate programs. In 1975, the government implemented a similar plan that worked well and had lasting results; the hope is that we realize the same success from a similar plan today…was the economic situation of 1975 comparable to our economy of today?
Gerald R. Ford – 38th President '74-'77
A brief look at 1975
- There was a ’73-’75 recession
- Much of the stock market showed gains all year (’73-’74 showed declines)
- In the middle of 1975, unemployment rates were as high as 8.7%
- Interest rates – Prime Avg around 7.5% – Mortgage Rates Avg – High 8% – 9%
- Foreclosures – The 70s enjoyed low foreclosure rates
- Consumer Confidence Index – ’75 – Low was 62.7 (12/30/08 it’s 38.0) - source -
Unemployment rate aside (assuming our current 6.7% unemployment rate is accurate) our nation seems like it was in a lot better shape during the ’73-’75 recession.
Will the Plan Pass?
I’m pretty sure the plan will get support from the House and Senate, it may get tweaked a few times, but the bottom line is that politicians are just as scared as us. Will it work…it’s hard to say. The real estate markets revival is hopeless if home prices do not hit bottom. I doubt the plan will prove effective if foreclosures aren’t drastically reduced, and that won’t happen as long as people are underwater on their homes. It doesn’t make financial sense for many Americans to hold onto their homes; it’s only a matter of time before thousands, if not millions, decide to trade in their credit score for less bills. If the proposal is included in the Obama Administration’s economic stimulus plan, I hope something more is done to curb foreclosures…stimulating new home sales will not be enough. Are drastic home loan modifications our only hope, or will the Hope For Homeowners Act of 2008 come through?
Forget about deciding if you’re for regulation or against…does the plan have what it takes to get the job done? Does the entire success of the plan depend on the fniancial industries efforts to decrease foreclosures, meaning it would fail if foreclosure problems weren’t adequetly addressed.
What Say You? Will $8 trillion be enough?
If you are for the plan, call this number now 1-866-924-6242 and tell your senators and members of congress how you feel. You can also shoot them an email here
UPDATE: More details about the Fix Housing First Proposal – 1-7-09
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It seems there is so much speculation out there on this topic. Lots of great information thanks for the post!
It’s amaizing to me that many experts saw the housing problem coming for years, yet lenders continued to put unqualified buyers in homes, knowing that many would end up in forclosure.
@Jeff – I hadn’t realized there was so much until I started the research – it seems, like all other bailouts, people have opinions. There hasn’t been as much media coverage on this one, but that may be because it’s not a “bailout”.
@Kevin – Same here – I’m amazed when I hear about some of the loans that were given. One guy I meet was allowed 5 loans on homes all over $200,000 (some were considerably more). He makes $50,000/year, and needless to say, all homes have been foreclosed on.
Bailouts set such a poor president for the future. I just can’t understand why people are so short sighted. Greed in America has run rampant and government seems to be doing all they can to promote it. If the US government wants to fix the problem, hold people accountable. Next time around people will think twice when purchasing homes, cars, or whatever that they simply cannot afford.
@Todd – I certainly agree that people need to be held accountable, more than that though, the leaders at these banks need to be held accountable. I’ve read that most banks got billions in assistance for their bad decisions; I’ve seen people lose their homes, credit and much more from their decisions – I’m of the opinion that the leaders deserve more of the blame – don’t they get paid millions to manage risk? I think most will agree that when you have the news, the government and professionals tell you that buying a home is a good investment, and they approve you to buy that home, you’re going to buy it…
Hopefully, this era will make Americans more modest
It is a nasty and vicious cycle…the prices keep dropping which forces more foreclosures which makes the prices drop and so on. At some point though, people will decide the prices have dropped enough and start buying homes again. I certainly hope this new plan will work.
I think it’ll fix things in the short run. But if you think about it, the long term affects are much worse than the short term affects. The people who are middle aged (30′s and 40′s) won’t have to worry about much for a while, but the young people will be paying off this debt for the rest of their lives. So will their children’s childrens. Bush really screwed us over.
Phoenix, you are right no track. Sure, everything will seem okay in a year or two but what’s happening is no more than a postponement on the inevitable. Eventually someone has to pay off all this debt. Taxpayers are already burdened with paying for services for illegals and government overspending. This is a ship slowly sinking. The most unbelievable part is many of know it’s happening but no one in government seems to have a clue. Keep overspending, helping those who won’t help themselves, and bailing out industries. What a great precedent to set for the future.
@Phoenix and Todd – thanks for stopping by and pointing out that whatever debt we incur now will be around for awhile. I hope we find some way to prevent it all from getting passed on.