Editor's note: The following is a collection of real estate professionals' responses to a real estate-related question.
QUESTION: What will happen to the U.S. economy and the housing market if Congress does not approve the proposed bailout plan?
Miami Beach, Fla.
For the first time, many people have expressed that they are "scared."
If something isn't done, the economy could come to a screeching halt because there is no liquidity in the market. No money to lend will freeze up the economy. Property values have come down tremendously in the last three years, but that isn't such good news if mortgages are virtually impossible to get.
Additionally, even when this crisis is over, there will still be so much fear in the air that it will take time.
The U.S. economy will really suffer in ways that are hard for us to imagine. We are so used to credit being available that we can't imagine life without it. If employers can't borrow money there will be more job losses. If people lose their jobs they won't be able to make their mortgage payments. This would put more homes on the market and reduce home prices even further. Homeowners who are already in trouble cannot expect anything out of this bailout, but we need to do it to prevent further catastrophe. Even with this bailout we won't see things change overnight.
We need to go back to living within our means and saving some money for harder times. Emergencies and hard times happen, and we need to take some personal responsibility for protecting ourselves to the extent possible. That may mean foregoing the big-screen TV or putting off the purchase of the new car for a little while, or deciding whether you really need yet another pair of shoes. We need to do this on a personal level while the government acts to get credit markets moving again.
Prudential Don Foster
I've been listening to both sides of the issue and I'm not so sure a bailout is the right way to go or whether it will actually help our housing market. Why can't the government suspend or lower capital gains taxes so that investors would be more likely to invest, thus allowing the market to self-correct?
At this point, halting the steady stream of foreclosures is the key to changing the real estate market and the economy as a whole. As Rep. Jeb Hensarling from Texas put it, "better to do it right than do it fast." If the bill is altered and doesn't pass again we should expect to see another drop in stocks and consumer confidence to edge down even further, causing a continued deterioration in the economy.
What will happen if Congress does not come up with a new bailout plan soon? I am not an economist. I do know people.
I think the most important thing is to calm buyers down. My experience is showing that many buyers are sitting on the sidelines. I don't believe they are waiting for prices to drop further, but rather many buyers falsely believe they are unable to get a loan at this moment. They believe that the credit freeze has affected the mortgage market already. Many buyers also believe that they haven't been able to get a mortgage for some time now. The truth is that it is harder to get a mortgage, but buyers can still borrow money.
Banks are still lending -- it is the lending guidelines that are tougher. Now a buyer needs halfway decent credit and a down payment. Banks also want verification of employment or income, and verification of assets. Even buyers with less than perfect credit can get an FHA loan. Long gone are the days of "no doc" loans. Now the banks want everything documented. Banks are going back to the old-school underwriting practices: verify everything.
If Congress does not negotiate a new bailout program, then I think that as everyone feels the pinch of a bad economy, many people will not feel comfortable moving, even if they can get a mortgage.
Information compiled by Lai Saetern, Inman News.
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