My Blog

In retrospect, it is clear to most economists that the housing downturn has been a major contributor to the current economic recession.  As we look to a potential economic and jobs recovery, it is equally clear that any sustained recovery will be difficult without a healthy housing market.

In an effort to stimulate the housing market—and therefore the economy in general—Congress has provided tax credits to certain potential homebuyers.  Currently, some buyers who have not owned a home for at least 3 years are eligible to receive a tax credit of 10% of the purchase price, up to a maximum credit of $8,000.  In addition, current owners of a principal residence may be eligible for a tax credit up to $6,500 for buying a principal residence.  Both of these incentives have helped, but they are scheduled to expire for contracts signed after April 30, 2010 or closed after June 30, 2010.

Where do we go from here?

For “distress” homes, new rules are scheduled for implementation on April 5, 2010, and will run through December 31, 2012.  This is a concerted effort to more efficiently deal with Short Sales and potential Foreclosures.  If the owner of the problematic home is eligible for the Loan Modification Program, this will provide an option for short-circuiting the cumbersome process of closing these transactions.  Getting many of the distressed homes off the market would be a step in the right direction for a stable, healthy housing market.

In my opinion, additional “medicines” are needed for this patient to be restored to health.  These difficult challenges may require a new level of cooperation among federal, state, and local governments—and perhaps community associations as well.  I will leave it up to the politicians to invent the monetary incentives that would stimulate home buying.  I would like to see a suspension, reduction, or elimination of some of the “disincentives” to buying a home.

For example, the State of Florida currently charges documentary stamps for the privilege of purchasing a home.  It also charges an intangibles tax on mortgages.  Further, many community associations charge transfer fees to a buyer who is obligated to become a member of their association.  These disincentives can add 3% or more to the cost of the home.  These expenses were not an issue when buyers were beating down sellers’ doors a few years ago.  Today, they are major obstacles to normalization of the housing market. 

These are not normal times, and it is time to think outside the box.