Realtors introduce stimulus plan
Feds urged to buy down mortgage rates
By Inman News, Monday, November 10, 2008.
Editor's note: An earlier version of this article contained an error. The tax credit, as proposed, is intended for all buyers -- not just first-time buyers.
ORLANDO -- Directors for the National Association Realtors on Monday formally signed off on a real estate stimulus proposal that includes a temporary $7,500 tax credit for all buyers, with no repayment requirement, and a temporary federal buy-down of mortgage rates to 4.5 percent or less.
The group's plan also calls upon the federal government to make permanent the temporary increase in FHA, Fannie Mae and Freddie Mac loan limits to $729,750 in high-cost areas. The limits are scheduled to roll back to $625,000 on Jan. 1.
And the plan reiterates the association's long-standing aim to permanently block banks from engaging in real estate brokerage and management.
Dale Stinton, NAR CEO, said that the group's proposal would cost an estimated $100 billion per year and its temporary relief measures would run for two years.
Realogy Corp. floated the idea of government-financed interest-rate buy-downs in October, saying they could unleash pent-up consumer demand for housing (see story). Traditionally, sellers have used interest-rate buy-downs as an incentive, paying lenders extra points up front to obtain a reduced interest rate for a buyer, often for the first two or three years of a loan.
Stinton said NAR arrived at the 4.5 percent or lower interest-rate buy-down level for a 30-year fixed-rate mortgage as "a result of some surveys and focus groups and talking to some brokers around the country," and that the group's research indicates that a buy-down in interest rates to 3 percent to 4.5 percent would get the market rolling again.
"We think in a couple years things will come back to where they should be," Stinton said. He said interest-rate buy-downs could be funded as a part of the $700 billion federal plan to bring liquidity back to the financial markets.
Under the proposal, the rate buy-downs would apply to the purchase of "all new and/or existing homes sold up to $1 million in price," and "There are a number of ways in which the government ultimately could decide to structure and fund this program, which could be addressed as part of the stimulus packages currently being discussed in Washington."
Stinton said, "It's a small price to pay, in my opinion, to stop the hemorrhaging," adding that a more prolonged market slump could prove far more costly.
He also said that past stimulus efforts fell short in getting "the demand side moving again."
"We have to find a bottom to this market, from the real estate point of view and from an economic point of view," he said.
Several directors proposed to amend the language in the four-point plan, though most amendments failed as NAR officials urged directors to adopt the given language as a starting point for federal lobbying efforts.
Although Congress is expected to consider passage of another stimulus bill when it returns for a "lame duck" session, some economists have recommended that it focus on government-funded infrastructure projects like roads and bridges that create jobs and stimulate spending (see story).
Also at the NAR board of directors meeting, association officials announced the approval of the charter for the group's federal credit union launched by the group.
The group's budget, approved at the meeting, anticipates that membership could drop to about 1.06 million in 2009, down from an earlier projection of about 1.08 million. The revised projection is also down from a peak membership of 1.36 million in 2006 and a level of 1.24 million as of Oct. 31, 2008.
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Submitted by Sean OToole on November 10, 2008 - 2:06pm.
Talk about a sure way to make this situation worse. To get back to a healthy market we need to return to affordable pricing. Period.
Remember people buy based on payment NOT on price.
These measures WOULD artificially increase prices in much the same way as interest only and negative amortization loans artificially increased prices and put us into an unsustainable situation that collapsed on itself.
So now that lenders have decided their not willing to make stupid loans, NAR thinks the taxpayer should instead. Have they completely lost their minds.
Why exactly is it good to artificially inflate home prices? Seems to me that it only accomplishes the following:
1. Holds down the rates for fixed income investors (retirees) pushing them to take greater risks with their retirement savings (recent events should make it clear how badly that can end).
2. Increases tax payments. Higher prices mean higher property taxes. Good if your a fan a big government and feel like you don't already pay enough taxes I suppose.
3. Socializes home ownership. Why should taxpayers pay down rates for new homeowners or those in foreclosure. Is their ability to own a home somehow more important than the taxpayer who actually saved for a down, bought a home they could afford, and didn't use it like an ATM?
In the hardest hit areas, where prices have fallen the most, sales activity has returned. The sooner we let prices fall to affordable levels the sooner we get back to a healthy real estate market.
Sure their proposal might create a short term bump in resale activity - no one can resist a freebie. But what happens then? Isn't it time we stopped trading tomorrow for today?
Sean O'Toole
Founder / CEO
ForeclosureRadar.com
ForeclosureTruth.com
Submitted by Gregory Bain on November 10, 2008 - 2:19pm.
Once again, the National Association of Realtors does not speak for me. I don't know who is in the group that makes these stupid suggestions, but I don't know one real estate agent that agrees with their plan. Maybe, we need a new association. Mr. President, Congress and Mr. Paulson - please don't listen to these ideas to "stimulate" the economy. Just say NO to LOBBYISTS.
Gregory Bain, ABR, SRES
Realtor Associate
NJHomes@Ask4Greg.com
Submitted by Stephen Graham on November 10, 2008 - 2:21pm.
If there are interest rate buy-downs provided, they should be for the entire duration of the loan, not teaser rates; and, such a program should be limited to purchases only.
Notwithstanding, this could be good idea to get the fence-sitters moving.
Associate Broker | Buyer's Agent
www.realtown.com/BuyersAgentGeorgia/blog
www.georgia-new-homes.net
Submitted by Paul Francis, CRS on November 10, 2008 - 3:22pm.
Only $100 Billion a year?? Wow.. what a deal!!
Government intervention (handouts) is not a solution for finding market bottoms in my opinion and these proposals are only wealth re-distribution programs in a more complex form.
Unfortunately, it appears somebody is still in denial about how everything became the way it is in the first place. You can only wonder why... HMMM???
Sure.. everybody wants a piece of the $700 Billion being put up by Taxpayers but are these programs really going to help the Free Market or simply create a Government Market? Are these programs going to make for a stronger country in the future?
Studies have shown that Government programs put into place around 1933 prolonged the Great Depression by 7 years. Are we going to prolong the pain or get it over with and build a future based on solid economic principles and not strapping Americans with credit (debt)?
Home values in our area have already taken the hit and while it hurts, sales activity has increased significantly due to homes being affordable again.
Don't mean to rant but these are band-aid proposals that are not addressing the real issues IMO.
Paul Francis, CRS
Prudential Americana Group
www.LasVegasRealEstateHome.com
702.592.3058
Submitted by Anne Hensel on November 10, 2008 - 3:27pm.
This is crazy, what are they thinking? Interest-rate buy-downs, downpay assistance. Does anybody really think that will get us out of the mess?
How about lower, I mean much lower property taxes, lower insurance rates. Here in Pinellas County Florida that and nothing else would make a huge difference. "We think in a couple years things will come back to where they should be," Stinton said. . . . .What kind of statement is this? I do not even think I want to know where HE thinks "we should be"
Anne Hensel
Broker, ABR, E-PRO, C-CREC, ASR, AHS, TRC, RECS
South Beaches Real Estate Professionals
727 409 8706 www.Southbeaches.info
Submitted by Ryan Elliott on November 10, 2008 - 3:48pm.
With all due respect, is this a joke? How do you think we got into this mess? People buying homes they couldn't possibly afford unless they got a crazy low interest rate. You can either afford to buy a home based on your credit, down payment, and the current interest rates or you can't PERIOD. This program would do nothing but prolong the inevitable. We need to quit trying to figure out a way to get people that have no business buying homes, buying homes. Getting the government involved in manipulating interest rates is a recipe for disaster.
Ryan Elliott
ryanassist@gmail.com
Submitted by Emily Medvec on November 10, 2008 - 4:02pm.
This is nuts! NAR needs to focus on providing benefits to its members NOT by NOW making homeowners pay indirectly with government interest rate buy downs for our propects. Sadly, it appears NAR is out of touch with its members, homeowners and finance economics 101. If you are not reading it already, get a copy of "Bad Money" by Kevin Phillips and learn more about the reality of our financial industry and real estate today. I spent 25 years living on Capitol Hill in DC and I know from experience how trade associations, especially those located in walking distance to the Hill lose touch with their members and eventually any understanding of reality outside the beltway. In my opinion, NAR needs more than a social media position, they need to listen and poll their membership before creating a Realtor stimulus package. I sincerely hope there is no TV ad campaign in the works funded by our dues launching this idea! It is time to write NAR and remember "yes we can!"
Emily Medvec, Realtor
Prudential Santa Fe Real Estate
Best Anytime Cell 505.660.4541
www.emilymedvec.com
Submitted by Emily Medvec on November 10, 2008 - 4:12pm.
Part 2. I missed this great Inman News story because of my focus on the election, but here is the link http://www.inman.com/news/2008/10/30/polls-show-optimism-about-housing-r... and you can see how and from whom NAR got this stimulus package -a survey paid for by Realogy and JWalter Thompson. What will be next?
Emily Medvec, Realtor
Prudential Santa Fe Real Estate
Best Anytime Cell 505.660.4541
www.emilymedvec.com
Submitted by Jodi Summers on November 10, 2008 - 4:21pm.
This is such a vague explanation of how they arrived at the interest rate buy down:
‘NAR arrived at the 4.5 percent or lower interest-rate buy-down level as "a result of some surveys and focus groups and talking to some brokers around the country," and that the group's research indicates that a buy-down in interest rates to 3 percent to 4.5 percent would get the market rolling again.’
Sounds like a bunch of people chatting over cocktails… site the Anderson report or some PriceWaterhouseCoopers study…but let’s give this number their asking for a little credibility.
Best….
Jodi Summers
The SoCal Investment Real Estate Group
Sotheby’s International Realty
310. 392.1211
fax: 310. 392.1001
jodi@jodisummers.com
www.SoCalGreenRealEstateBlog.com
www.SantaMonicaPropertyBlog.com
www.SoCalMultiUnitRealEstateBlog.com
**
Nature does nothing uselessly. - Aristotle
Submitted by Jack McCabe on November 10, 2008 - 4:23pm.
I think the comments above mine represent a growing sentiment amongst a large percentage of the dues paying realtor association membership (those remaining members, that is)that their top tier leadership is out of touch with the realities of the situation, and their "well thought out plan" is a band aid, short term, delay the inevitable and prolong the pain wishlist.
This from the same leadership that played a significant part in encouraging an artificial market, hyping it to continue the gravy train, then ignoring the seriousness of the evolving crisis, all the time releasing misleading analysis and "expert advice", to persuade the public to buy into a market of financial ruin.
The respect and credibility of association members in the eyes of the general public has been deeply tarnished for unforetold years to come, and the association's leadership is largely to blame.
It's my opinion the NAR's housing rescue plan is unworkable, ill conceived, a worthless temporary fix, destined for future failure, and of no real value.
I would recommend anyone in government view this request in the same stack of papers as the NAR's market analysis and future predictions from the past four years, and file it in the same wastepaper basket with all the the other lamebrain, doofus recovery requests for money.
Submitted by Eric Bouler on November 10, 2008 - 4:35pm.
Eric Bouler
Prudential Gardner
New Orleans,La.
www.neworleanscondotrends.com
www.ericbouler.com
If you want to move homes this is a great way to get people interested in buying again. The cost to own a home needs to go down. it is much cheaper than the 700 billion bailout of the banks which may never reach main street. Too bad the congress never takes time to work out the details and the reasons.
In this area insurance rates and taxes on a two hundred thousand dollar home can easily be $400 to $500 per month.
Submitted by John Rakoci on November 10, 2008 - 5:12pm.
Who needs this? Well, NAR could use it as they need all the members they can get today. Local MLS & associations need it. The RE schools need new students. The order taker agents could use some help.
Our clients and the reputation of the industry does NOT need this.
obama is going to do enough damage and does not need this for assistance or a place to shift blame in a few years.
Submitted by Paul Francis, CRS on November 10, 2008 - 5:22pm.
By the way.. It appears that the overall sentiment in the comments is to change the headline to something more appropriate then "REALTORS".
Paul Francis, CRS
Prudential Americana Group
www.LasVegasRealEstateHome.com
702.592.3058
Submitted by Marc Rasmussen - Sarasota FL Real Estate on November 10, 2008 - 5:26pm.
This is the best that they can come up with. We need to stop the snowball effect of these foreclosure. Foreclosure drag prices down which in turn creates more foreclosures.
Try again.
Submitted by Jay Thompson on November 10, 2008 - 6:13pm.
"Realtors introduce stimulus plan"
That's some title.
This Realtor had nothing to do with it. Apparently neither did any of the Realtors commenting here.
Poor, very poor, choice for a title.
As for buying down interest rates, how about stepping back and taking a look at what got us in this mess to start with?
Jay Thompson
Broker / Owner
Thompson's Realty
Blog: www.PhoenixRealEstateGuy.com
.
Submitted by Jim Lyals on November 10, 2008 - 11:00pm.
The leaders of the Realtor Association must be in bed with the Realogy and the Zillow gangs!
WAKE UP! Our association didn't have the public's best interest in mind when they allowed "THE AMERICAN DREAM" to be given to people that never earned the money to pay for the "DREAM" and allowed the Congress to relax the requirements so those that were working, saving, to give those that were not a FREE ride to Home Ownership!
Where was our association and all of our dues monies going ( not to alert the public of how bad it was to allow people to have homes with poor credit, poor or no employment record, no downpayment and no right to own a home--remember its not a given right for everyone to own -its a EARN RIGHT for anyone willing to own their home.)
We sent our PAC monies to Congress members that voted for the $700 Billion--OOPs--$900 Billion dollar bailout to the financial market place so that Realtors would be able to have the power to get the stupid stimulus plans like this passed.
The next thing our association will do is have Barney Frank as a keynote speaker along with his good pal Chris Dodd at our next national convention! Now there is a pair to be proud of!!
Submitted by Ali Shahidi on November 11, 2008 - 12:13am.
This stimulus package government hand out is not a great solution. My opinion is that to resolve all these short sale and Forclosures is to let the homeowner to stay in the house with 3-7 years contract as a tenent with fair market rent, and the government as a homeowner till such a time that tenants is ready for recovery to pay off the government fully and become homeowner again as long as he/she is at a good standings. There are a few benefits to this: 1- homeowner will try hard to have good credit standing 2. wil stop drag down prices, 3. Government recover all tax dollars. what next
Ali Shahidi
Broker/Owner
Inter-Capital Group
San Jose, CA
Submitted by Barbara Bennett on November 11, 2008 - 5:03am.
In 1994 I bought my current home with a downpayment of over 30% (not my first home). The mortgage began at 3.75 Year 1, 4.75 Year 2, 5.75 Year 3. In Year 4 the mortgage converted to a traditional ARM with a 1% annual cap and 7% ceiling for the life of the loan. My credit was great and I bought well under my qualification level. I don't recall it being a "government program". It was terrific for me and I don't recall any detrimental effects to the National Economy.
There are well qualified Buyers now waiting for the bottom and some incentives to get them off the fence. If I could offer them something similar to my 1994 loan package, they would be buying and I would be spending.
I am not certain I understand why lenders can't do what they have done in the past to stimulate business: offer some limited quantity/time attactive loan packages to highly qualified borrowers.
Submitted by Jim Lee, Portsmouth New Hampshire Realtor on November 11, 2008 - 10:47am.
I'm one of the NAR Directors that voted for our proposal along with the other thousand Directors present in Orlando.
I hope we can all agree that the economy is not doing well now and that a rising tide, i.e. real estate sales, tends to lift all the boats in the harbor such as cars, consumer goods, etc.
Our proposals are mostly temporary and make far more sense to me than shoveling money into banks which seem to be sitting on it now and still not making loans. The pipeline is clogged up and needs to be unstopped; this proposal would help unclog it immensely and now rather than later.
NAR is a member driven organization and the members that took the time and made the personal investment to attend our annual convention are the ones that approved our proposal.
It's easy to sit on the sidelines and criticize and harder to step up to the plate and try to make good things happen for everyone.
Jim Lee, CRS, ABR, GRI, NAR Certified e-PRO Trainer
Realty Executives Associates, Knoxville, Tennessee
www.KnoxvilleHomeCenter.com mailto:Jim@JimLee.com
(865) 693-3232, My Personal Toll Free # 1-800-662-2488 ext. 163
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Submitted by Jay Thompson on November 12, 2008 - 5:23am.
"NAR is a member driven organization and the members that took the time and made the personal investment to attend our annual convention are the ones that approved our proposal."
Really Jim? So every REALTOR that attended the NAR Convention and Expo got to weigh in and vote on this proposal?
If that is the case (and I don't believe it is) then that is utter crap. Since when does attending a convention make one more important or worthy?
Please don't demean me for not attending the convention. It doesn't always work out to abandon my kids and fly across the country. That doesn't make me any less important or my voice matter any less than someone who happens to attend a convention and trade show.
Jay Thompson
Broker / Owner
Thompson's Realty
Blog: www.PhoenixRealEstateGuy.com
.
Submitted by Jim Lee, Portsmouth New Hampshire Realtor on November 12, 2008 - 10:44am.
I believe you know that the NAR Board of Directors were the ones that voted on the stimulus proposal Jay. However it was discussed in both caucuses I was in as well in the halls.
I believe you also know that member input is always welcomed.
Aren't you being a little dramatic when you say "abandon my kids and fly across the country"? If you were at the 4 day long convention I believe you would return home when it ended.
If you have some better ideas you should forward them to the appropriate committee for their consideration.
Until better ideas come along the 4 point plan is what we have to work with.
Best regards,
Jim
Submitted by Jay Thompson on November 12, 2008 - 3:32pm.
Jim -
No, I wasn't being over-dramatic. You were the one that mentioned it was the members that took the time and made the investment to attend the convention who approved the plan. Aside from being an incorrect statement, this strongly implies (in my opinion) that those of us chose not to (or couldn't) attend are somehow inferior to those that did.
Those that attended are no better, nor worse than those that did not.
I personally am not comfortable leaving a 15 and 17 year old home alone for four days, and for all practical purposes, Orlando is "across the country" from Phoenix. Other parents may have no qualm about that. I do. Maybe it's just me.
But that's really neither here nor there. What I have issues with are headlines such as this article's "Realtors introduce stimulous plan" like we all had something to do with it. "Realtors" did not introduce this plan - a very small subset (less than one tenth of one percent) of the Realtor population approved this plan. It's a lousy headline.
It also bothers me that a NAR Director would come onto a public forum and make a statement like, "NAR is a member driven organization and the members that took the time and made the personal investment to attend our annual convention are the ones that approved our proposal."
To say those that attended approved the proposal is patently false. It was the Directors, not the members that attended the convention, who approved this proposal. I know this, and you know this, but not everyone reading here knows this. I suspect when many read "I am one of the NAR Directors..." followed shortly after by "the members that took the time and made the personal investment to attend our annual convention are the ones that approved our proposal" then they believe that those in attendance approved it.
I appreciate your suggestion to involve the appropriate committees. I have. I hope others do as well.
Respectfully,
JT
Jay Thompson
Broker / Owner
Thompson's Realty
Blog: www.PhoenixRealEstateGuy.com
.
Submitted by Jim Lee, Portsmouth New Hampshire Realtor on November 13, 2008 - 5:18am.
How's this for accurate: "NAR's Directors were presented a proposal to stimulate real estate and the economy, to take to Congress and the White House. They voted in favor."
FYI, the BOD is empowered to make decisions for the entire membership just like the U.S. Congress is empowered to make decisions for all Americans so the headline; "Realtors introduce stimulus plan" is completely accurate.
Obviously not everyone will always be happy with those decisions but that's the way it works unless someone can come up with a better idea.
Best,
Jim
Submitted by Jay Thompson on November 14, 2008 - 1:10pm.
Jim -
We'll just have to agree to disagree about the accuracy or effectiveness of the headline of this article.
You're right, the BOD is empowered to make decisions for me, just like Congress. And just like Congress, I don't have to agree with a BOD decision.
Using your argument, a headline like "Americans Introduce $700 Billion Bailout" is also accurate. Maybe that's technically true, but using broad sweeping titles like "Americans" or "Realtors" is a poor practice, in my opinion.
If the headline had read "NAR Directors Introduce Stimulus Plan" it would have been far more accurate and painted a truer picture, again in my opinion.
Jay Thompson
Broker / Owner
Thompson's Realty
Blog: www.PhoenixRealEstateGuy.com
.