By Robert Freedman, Senior Editor, REALTOR® Magazine
President Barack Obama has a lot on his plate but if you could spend a few minutes with him, what idea would you put in his ear to help improve housing markets?
Trulia CEO Pete Flint recently posed that question to readers of the Trulia blog. The closest thing to a consensus opinion among the 28 readers who responded: Get the U.S. Treasury to do what it originally said it would do when it lobbied for the $700 billion in Wall Street rescue funds back in October 2008. As one reader says, "Get the mortgage companies that were given bailout monies to loan that money out to people to start buying."
The fact is, REALTORS® were concerned with banks' intentions from the very beginning. When lawmakers were debating the rescue package, two leaders of our industry—Gary Keller of Keller Williams Realty in Austin, Texas, and Ken Riggs of Real Estate Research Corp. in Chicago—told me and other REALTOR® Magazine editors in a conference call we hosted that bank actions needed to be monitored carefully because banks were under no obligation to pass their money through to borrowers. "Although the intent of the legislation is to free up capital for lending on homes, cars, college, and business inventories, the government doesn't have a mechanism in the bill for making the banks turn around and lend the money back," Keller said at the time. "So no one knows what will actually happen once a bank has its capital freed up."
Here we are several months later, with half of the funds spent, and real estate professionals are still waiting for the banks to plow assistance into credit markets.
Other responses to Flint's blog post fell into three broad categories:
1) Help households become homeowners
2) Help home owners at risk of default stabilize their position
3) Help the industry help itself.
Top among the suggestions for helping households become owners is allowing people to save for a downpayment using tax-free dollars, what one person called a home savings account. Other actions recommended are in line with what NAR has been advocating for months: Increase conforming and FHA high-cost area loan limits, bring down interest rates, and make the homebuyer tax credit a real credit rather than a loan in disguise.
One person said getting interest rates down to 4 percent would make a real difference in getting people off the fence. NAR doesn't advocate aiming for a certain rate—that would encourage prospective buyers to stay on the fence waiting for the target rate—but it did applaud the Federal Reserve's actions last month to begin buying mortgage-backed securities. The move helped bring down rates to just under 5 percent for a time without the Fed having to lower its short-term target rate, which is already just barely above zero.
There were all sorts of suggestions for helping troubled home owners, but a recurring theme throughout was the need for the federal government to get lenders to rethink overly tight underwriting standards and take whatever steps are necessary to get lenders to take loan modifications seriously. Replacement loans with 40- and even 50-year maturities should be an option as well.
Suggestions for the industry to improve itself really don't fall into President Obama's portfolio. Many commenters said the industry must make it harder for practitioners and mortgage brokers to get licensed, but that's a state issue. All the federal government can do is encourage, recommend, or cajole states to take action. Stricter enforcement mechanisms for violations are needed, too, some readers said.
A few people weighed in on the stimulus bill now making its way through Congress. Here the focus needs to be on long-term investment that will produce a real payoff in future increases in economic activity and new jobs. One person pointed to the ideas being generated at a think take called the Davinci Institute, which is touting investment in future-oriented technologies like a national wireless Internet grid, massive data storage libraries, self-navigating on-demand automobile systems, a "whole earth" genealogy project, digital upgrading of community libraries, a space elevator, a transcontinental freeway, and space-based power stations. Few of these ideas have anything to do with real estate but they could conceivably pave the way for the kind of economic expansion that really does growth the pie, making home ownership possible for more people.
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