Wednesday, January 28, 2009
Only Time Will Tell: Real Estate and a New President
By Mike Hughes
How will the real estate market fair under new president, Barack Obama? Obama’s plan to swiftly enact a new economic stimulus package; plus continued rock-bottom mortgage interest rates, low inflation and improving consumer sentiment could begin to have a positive effect on the real estate market. Consumer confidence rose a couple percentage points this past month, which is a likely result of the inauguration of President Obama, although this cannot be directly tied. Additionally, there’s a “tax credit with teeth, nonrepayable and with a use-it-or-lose-it deadline,” which can result in additional sales. According to estimates, sales may number around several hundred thousand over the next year.
In terms of numbers, mortgage rates remain under 5%, inflation is close to zero, the CPI urban index dropped to seven tenths of a percent, and the energy index is down by 8.3%. The positive rise of home sales due to affordability is overshadowed by a price drop of 35%.
President Obama’s plan to improve housing in the United States begins with his $825 billion dollar economic stimulus package, which includes a $7,500 home purchase tax credit. In addition, the administration is working on reforms and new uses for the second half of the Troubled Asset Relief Program, which was the $700 billion financial rescue fund that Congress approved last year.
Furthermore, Obama has several high priority items to help benefit the real estate market. First is foreclosure relief, which encourages lenders to reduce delinquent borrowers' principal balances and payments in exchange for a federal guarantee that they'll acquire no added losses. Second, Obama plans to pass legislation to allow bankruptcy judges to step in to prevent foreclosures by reducing monthly payments, interest rates and principal balance for owners who file for bankruptcy. Third, Obama wants to implement last year's higher mortgage limits for high-cost areas around the country. This would greatly benefit borrowers, Realtors and builders in California and along the East Coast. Finally, the Obama administration is expected to consider reforms for the federal financial regulatory agencies further down the road.
Although the low price of housing is a downfall for sellers, it is truly a buyers’ market for anyone looking to purchase real estate. The great condition of the housing market, paired with the success of President Obama’s plans to improve housing could potentially improve our nation’s real estate. All in all, it is safe to say that only time will tell if the Obama administration will be capable of reviving the real estate market.
Real Estate Outlook: Obama Effect
Washington Report: Expectations for Housing
Obama Lobbies for $825bn Plan