This week, President Obama launched yet another initiative to help the beleaguered housing market – which is now going on its fourth year of economic catatonia.
But Obama has not created a new plan to fix housing. He is simply renewing an existing program, whereby Fannie Mae and Freddie Mac are allowed to refinance homes where borrowers owe more on their mortgages than their homes are worth.
Core Logic estimates there to be about 11 million of these homes in the U.S. housing market.
In the original program from 2009, a homeowner would not qualify if they owed more than 25% than their home was worth. Under the new plan, that cap will be eliminated, so a homeowner will be eligibl, no matter how deep underwater they are. In addition, fees are either waved reduced.
Let’s hope this new plan works better than the myriad of other programs tried, including the Home Affordable Mortgage Program and Home Affordable Foreclosure Alternatives programs, both of which have never lived up to their lauded expectations.
But whatever the results, the new plan will not solve the problem of the 6 million borrowers who are not making their payments and still at risk for foreclosure. Nor will it help the millions of foreclosures that are already hitting the housing market, adding existing inventory to already bloated levels.
Bank of America Merrill Lynch analysts have now estimated that distressed or “real estate owned” sales could reach 1.48 million properties in 2013, a 10% increase from the projected amount in 2012.
Another plan under discussion is to rent houses back to the people who are now struggling to remain living in them with a mortgage. I can’t even begin to imagine Uncle Sam trying to be a landlord, or the strange situation of living in a government-rented home that once belonged to you.How to Fix Housing – and Fix Unemployment
Among real estate analysts, the one constant savior discussed is the J-O-B. When the jobs come back, real estate will also come back.
But why can’t we solve two problems at once? Why can’t we create a real estate program that will simultaneously reduce the inventory of foreclosures, as well as create an enormous number of jobs to boost the economy?
I am talking about providing incentives (finally) to real estate investors.
For the record, I am both an investor and a Realtor who specializes in selling foreclosures. However this is not about pumping up my income. This is about pumping up the economy.
A big reason for our rising unemployment rate is the fact that real estate was a big driver of growth in the 2000s. When the bubble burst, the construction and other real estate related jobs dissolved, and have never really returned.
A closing requires the services of home inspectors, appraisers, a mortgage broker and all of the people who assist these service providers back in the office. New home construction employs roofers, electricians and plumbers. Fixing housing is the fastest way to fix the job market. After the home is sold, the new owners go to Home Depot (NYSE:HD) or Wal-Mart (NYSE:WMT) to purchase paint or furnishings for their new quarters