Life After the Housing Tax Credit?

Okay Peachtree City, I apologize because it has been a minute since I’ve posted an article.  But honestly I have been swamped with assisting first time home buyers get their deals closed by the deadline which was April 30th.  After I finally got a chance to take a breather I had to stop and think about what would happen now that the tax credit is gone.  Did this initiative help stabilize our fragile economy or was it all just a waste of taxpayers monies to the tune of approximately $35 billion?

I guess it really depends on who you ask!  Most Realtors and Brokers I speak with are basically “cautiously optimistic.”  Folks, it was estimated that over 4 million Buyers will eventually be able to take advantage of the tax credit.  That number also include approximately 1 million “induced” buyers.  So what does that mean you say?  I presume that would mean that the other 3 million may have bought a home regardless of the tax credit.  I even saw a news report recently that focused on home buyers who did not care about the tax credit because they feel that with the glut of homes on the market Sellers are reducing their prices and the savings are now more profound. 

Okay, before you throw this initiative under the bus, let’s examine the data.  Many homeowners were experiencing mass fluctuation in home prices to the tune of trillions of dollars in lost equity through 2009.  Of course those plummeting home prices was the pin to puncture the bubble.  However, there were indications that home values not only took a dive but were “over-correcting.”  Experts have surmised that had it not been for the tax credit we may have seen another 10% to 15% drop in home values.  So can it be assumed that the tax credit actually help stabilize home values?

Hmmm…..I guess we will have to wait for the results as folks eligible for the program will be closing those deals through June 30th.   However, one thing I can agree on is that it at least boost confidence in a recovery.  That “perception” may prove to be a big part of the stimulus to our economy. 

I won’t be naive however and believe that we are out of the trenches yet.  In April there was a record 92,432 bank repos up 45% from 2009 and up 1% from March.  There were an additional 333,837 Foreclosure filings including default and auction notices.  That correlates to 1 out of every 387 US households. 

Hey, did you know that Fannie Mae has requested an $8.4 billion dollar bailout after losing $13.1 billion in the 1st quarter of 2010.  If you are keeping tabs that’s approximately $85 billion to date.  Just 4 days earlier Fannie’s twin Freddie asked for another $10.6 billion after posting $8 billion dollars in first quarter losses.  By the way folks, your Congress this past December lifted the limits on the twins so you probably won’t have to worry about them running out of funding.  Additionally, the next time you see your Senator maybe you can ask him why they are contemplating a financial reform bill that addresses bailouts but there is no mention of Fannie or Freddie.  Yes America…we have some work to do. 

I don’t have the answers but here are some critical ingredients to the recipe.  To start we need corporate investors to step in and replace the Federal Reserve buying mortgage backed securities.  We need a trend of stabilization of home values and a reduction in the of number of foreclosures flooding the market.  You might as well add in some sweetener like holding down interest rate.  But I suspect the catalyst that will get our economy to rise again will be getting folks back to work.  In Georgia the unemployment rate is 10.6%.  That more than the national average which is now 9.7%.     

In the grand scheme of things I don’t think you have to be a genius or Economist to know that the recovery of our economy is tied to the housing market.  Eyes wide shut America…..Wake Up!!!