12 Dec 07 
Solution to the Real Estate Market… is it Deserved and Will it Work?
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As many of you know the federal government recently implemented “The Bush Sub-prime Bailout” a new program meant to decrease the amount of future foreclosures. The idea is to encourage banks to voluntarily freeze interest rate increases on sub-prime loans set to balloon next year; the freeze would last for up to five years.
The problem I see with the plan is the qualifying criteria: only homeowners who are less than a month behind on their homes repayments, received their new home mortgages in 2005, 2006 or 2007 and whose interest rates will not reset until 2008 are eligible.
I believe that the plan will ultimately only help a small group of people, and that the impact will not be as big as it is perceived to be. Not only are many Americans convinced that this help will not be enough and will not affect enough, but we are split 50/50 as a nation on whether or not the homeowners deserve the assistance. Many believe that the called “irresponsible” homeowners should not receive any government assistance and many others believe that if you’re going to help some homeowners, you have to help all.
Whatever the outcome, I’m positive that, as usual, everyone will not be happy. I don’t oppose helping homeowners out because an increase in foreclosures will likely negatively affect me too. I’m fine with this new program as long as it helps a lot of people that need help. It doesn’t seem like that is going to happen and I’m not sure if I support the program.
Do you agree with it and support it? Why or why not?
Why don’t we create a program that will help more people, one with fewer restrictions? A program that may truly help stimulate our fading real estate market.
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Tags: american, Bush sub-prime bailout, federal government, forclosures, homeowners, new homes, subprime loan crisis
03 Oct 07 The Real Solution is In the Supply
One-way to rebuild a healthy real estate market is to decrease the amount of homes available for sale. Our recent efforts have been geared towards increasing the demand to buy homes. It’s pretty obvious that several experts, and the media, aren’t going to stop highlighting every negative aspect in the real estate market, so it might be a little difficult to increase demand. It’s their job to report the news, but why can’t they report positive news as well? When you want to know about something don’t you turn to the news or a well known expert?
What if a program, or several programs, were developed that encouraged owning a rental property or keeping your home off the market? If there were a few programs, homeowners could choose which works best for their situation.
The government could give tax incentives to sellers that agreed to keep their property off the market for X-amount of years? This might entice investors or homeowners because their payoff, if they agreed to hold onto their investment, would be greater.
The government, or lenders, could offer an annuity type of loan to homeowners. The loan would slowly tack onto the principle of the home loan each month. Homeowners wouldn’t receive a large lump sum of money, but their mortgage payment would decrease by X-amount each month and would slowly increase over the years. The lender and borrower would determine how much of a loan was suitable based on the homeowner’s needs and the lenders ability. The lender could stop paying the annuity at anytime if a borrower failed to meet their payment obligations.
Lenders could offer locked or lower interest rates to homeowners that agree not to refinance or sell their homes for X-amount of years (same concept as a pre-payment penalty). They could set the homeowners up on steadily increasing payment plan giving them lower payments initially, similar to an ARM, but instead of giving these incentives to new customers, lenders will be trying to avoid costly foreclosures.
Hopefully, these programs would keep homes off the market and help regulate when homes are placed back on the market. Programs like these would interest some sellers because many of them can’t sell their homes right now; in many cases, if they do, they’ll take a loss. I think most sellers would love to hold if they could cover or minimize their negative monthly cash-flow and others will be happy with keeping more of their money from the eventual sale of their home(s). Not everyone would qualify or benefit from programs like these but it could be a nice way to decrease the supply of homes for sale and improve the health of the real estate market.
I am pretty sure that we’ll need to develop several solutions to fix some of the mistakes or oversights that helped fuel this “over” correction. I know real estate is cyclical, but feel that some decisions have lead to a rougher market. There are some possible downsides to this solution such as the probable increase in new home cancellations, possibility of homeowners defaulting on new agreements and difficulty in implementing these plans, but there definitely could be a viable solution found in focusing on our supply of homes for sale as opposed to trying to increase the demand. Many of our markets have great potential and with a little help, we could be back on track!
Just a thought…
Tags: homeowners, housing information, housing programs, interest rates, lenders, property, Real Estate, refinance, rental property, sell a home
