| Realtors and Builders Push Government to Stimulate Housing |
| Written by Jonathan Smoke | |
| 11.07.2008 | |
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Discuss this article on the forums. (0 posts) As the housing, credit and now full-fledged economic crisis deepens, the housing industry’s two largest organizations are lobbying for directed efforts to stimulate demand. During their annual convention in Orlando yesterday, the National Association of Realtors announced a concerted effort to push Congress and the Treasury Department to focus on housing. The NAR plan calls for four specific actions. First, NAR wants legislation to eliminate repayment of the first-time home buyer tax credit, which has been deemed ineffective by most in the industry as it represents a limited yet complex loan as it currently stands. NAR also wants the credit expanded to all home buyers. The second action requested by NAR is for the government to make permanent the increased mortgage loan limits for FHA, VA and GSE backed mortgages.  Beyond these two consumer-oriented points, NAR also wants to shift aid and attention from Wall Street and the financial industry to housing. Their third action calls for the government to “focus the economic stabilization efforts on supporting the housing and mortgage markets instead of providing capital to banks with no strings attached.”The fourth and final NAR action request seems more for the benefit of realtors than the industry, as it calls for a permanent prohibition of banks entering into real estate transactions. I’m not sure what this really means. Banks are involved in real estate transactions by providing mortgages—surely NAR doesn’t want to eliminate that activity. Also, banks are involved in real estate transactions when they foreclose and when they sell bank owned properties. I think what they mean by this is to keep banks out of the business of listing and selling properties directly. In other words, protect their monopoly and commissions. The National Association of Home Builders presented a more direct plan in a news release Thursday congratulating President-Elect Obama. “To provide short-term targeted incentives that will help put a floor on home prices and encourage Americans to buy homes again,” NAHB is urging Congress to do two things. First, NAHB wants to replace the limited and temporary $7,500 first-time home buyer tax credit with a 10% home buyer tax credit up to a maximum of $22,000 but limited by the FHA loan limit in a given market. Like NAR’s plan, this credit would be available to all buyers who purchase a home over the next year, and the tax credit would not have to be repaid by the buyer. The other action called by NAHB is an interest-rate buy-down on conforming loans for all home purchases through the end of 2009. The plan would reduce the interest rate to less than 2.99% on 30-year mortgages for homes purchased through June 30, 2009. Then the interest rate would increase to 3.99% on homes closed between July 1, 2009 and Dec. 31, 2009. The NAHB plan is more straight-forward than the more political announcement from NAR. The NAHB plan also better addresses the core problem of depressed demand. But I do like the permanent increase in conforming loan limits suggested by NAR, so it should be added to NAHB’s platform. Furthermore, I would suggest an expanded method of establishing conforming loan limits to improve on the complex yet faulty method used this year. For the sake of “fairness,” the current tiered system relies on market level median home prices, but the government used some questionable data to establish the standards earlier this year. This has produced a complex and faulty system. Wouldn’t it be better to just set a straight-forward limit that applies everywhere but is also indexed to inflation? Finally, why not consider going above the median? If you want to stimulate home buying and support falling prices, make debt less expensive for higher tier priced homes. 
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