I thought I'd start another post for anyone who wishes to discuss the bill in the Senate, as it relates to housing, as well as the Treasury plan. So far, the former still includes $15,000 for homebuyers, but the 4% mortgages were voted down. News about the latter:
US Treasury to prop up housing under revamped bank bailout.
"Summers declined to get into details of the new TARP relief, but said a large chunk of it would go to housing.But we won't know the details until "the plan" is released tomorrow.
'The president's made clear that he's very committed to (preventing) foreclosures. I expect that it will be 50 billion dollars or more that will be directed at providing support for the housing sector of our economy,' he said."
Update: Pimco's Bill Gross says mortgage rates likely headed to 4.5%.
20 comments:
The $15k bribe doesn't make people more qualified to purchase overpriced houses. It solves nothing in the long term and is a waste of money.
Stopping foreclosure to me equates to subsidizing people's mortgages, writing down their principal, etc. Awful, awful idea. Sure, try to stop the next wave of resets. Even if that could happen, people will still walk away from their houses because they are so far underwater that it's worth it. You can stop foreclosures by threatening harsher penalties on people for walking away. But considering that's in violation of their mortgage agreement, it would be hard to enact. But that's the only moral path.
Here is something on the waste resulting from the stimulus.
And here is an economist's
discussion on whether the $15K tax break will help push up prices. He concludes that it is unlikely.
I think we do need foreclosure relief!!
And this is what I envision:
(1) a $4000 tax credit for former home-owners to offset security deposit and moving costs.
(2) An anti-discrimation law that says that if your lease-listed rent is less than half your former mortgage payment then foreclosures and shortsales must be excluded from the credit check calculation.
I think the bottom line is that no one will be able to buy a house (even if they wanted to ) if they have lost/ may lose their job.
Until this "off-the-cliff" unemployment is controlled, there will probably not be a lot of homes being purchased (nationwide)
I realize that the DC Metro market may uptick a little, since we "have all the jobs"
But then again, 15K is chump change to the Mcmansion market...
Here's the best thing that can be done, IMHO:
Allow people with good credit to refinance even if their property is underwater.
For many people, refinancing option will likely cut several hundred dollars or more off their monthly mortgage payment, reduce the risk of foreclosure, and also help stimulate the economy by shifting money away from the mortgage payments.
I think at this juncture jobs are more critical than housing, excepting, as Kob says, the need to refinance current underwater mortgages on better terms. (I know people who would be happy to suck up the underwater part if they could just stop paying interest-only payments and feel like they were making progress).
I would love to see the corporate tax rate cut by half, and the payroll tax cut.
I know, we're all economists. :-)
is this 15k help comes in the bill they are passing. i was searching for the exact time it effects etc...since i am going for closing some time soon i want to know...
manju,
If it happens the current writing has it "taking effect" as of when Obama signs the bill. Dgg moved his closing to the end of february just in case. The start date of the credit is the date he signs the bill into law, so if you close before this is a done deal, you get no free money. Given it hasn't passed the Senate yet, and the House and Senate bills are considerably different such that the reconcilation in conference may be contentious... and then the reconciled bill has to get through the Senate again, I'd say at least 2 weeks to be on the safe side.
Obama is suppose to address a joint session of Congress on February 24th. I would be shocked if something wasn't signed before that point. Neither he, nor the democrats that control Congress want him coming to the Hill with this bill still being up in the air. I do think this is far from a done deal. If Democrats alienate the 3 Republican "compromisers" in the Senate by adding more spending back in to the final bill, I think they could lose the vote. IMO, no bill would be better than this bill though.
Here's my version of what I'd do (for what it's worth which isn't much! LOL).
1)cut corporate tax rate.(permanent)
2)give employers a 12 to 18 month tax holiday on the employers' portion of FICA.
3)reduce the lowest two tax brackets from 15% and 25% to 5% and 15%.(could sunset once recession ends)
4)agree with others here who suggest some type of program that would help those underwater refinance their loans (no principal write downs though-unless banks approve/initiate)
5) targeted spending for infrastructure - not lumps of money handed to the states to help them balance their budgets, but limited spending for things such as power grid,etc.
IMO, the bill in its current form is not stimulus but a reckless experiment in spending that unfortunately has a better chance of extending this recession than helping it.
Manju,
No. that is not my understanding based on the pdf link to the proposal posted a few days ago on this blog, nor Calculated Risk's understanding of the bill.
If you want reliable information only use the actual official Senate site for active legislation, and read it thoroughly yourself. It should be section 25 of the senate version of the stimulus plan.
http://thomas.loc.gov/cgi-bin/bdquery/z?d111:S1:
Thomas.loc.gov
(caveat, all is up for grabs in the conference)
has anyone in Congress suggested cutting spending, you know, to actually build a foundation for recovery? what about coming to grips with the de-leveraging and lower consumer/business spending?
i guess my big question is: what happens after this stimulus? another stimulus? then what?
cara,
thanks, i think this is the correct link...check it out.
http://www.congress.org/congressorg/webreturn/?url=http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.1:
Give me $15K and I might consider buying that $110K townhouse I showed off the other day. Even if it were only the $11K (10%). The allure of owning is a powerful thing.
It's still not a 'smart' move, but I could see it happening.
Here's why it won't.
1) That's not applicable to downpayment or closing costs. It's a tax credit meaning I get the money back in April of 2010 and 2011. Useless 'now'.
2) There are a lot of other issues more important than financial impeding the buying decision for me.
Apply those two factors to a large portion of the population and you have a fat lot of nothing.
Xpovos,
i think the credit can be deducted for the 2008 tax. it won't be a down payment or closing cost, but you'll get it (or msot of it) back very soon.
so, don't file your 08 tax just yet.
Xpovos,
I'd go one step further than MM - you can always amend your tax return, and since the credit in its current form it could be applied to your 2008 return, you could conceivably borrow the $15K from somebody, buy the house, amend the return, get the credit, and pay your friend/relative/good samaritan back pretty quickly.
"i guess my big question is: what happens after this stimulus? another stimulus? then what?"
I heard it mentioned several times on several different tv news programs by several different economists that by the time all of this is said and done the government will be on the hook for $3-$5 trillion....trillion dollars!
One of the issues is that no one really knows where the bottom is in regards to housing....most say another 20% decline is likely.
A bank can't do business (make new loans)if their current assets continue to lose value. All they do/are doing is taking the money they are given (first stimulus package) and using it to prop up their balance sheets.
Not to worry, as a nation we have been here before...
Panic of 1873 - http://tinyurl.com/3fj89r
Panic of 1893 - http://tinyurl.com/otlyv
Long Depression - http://tinyurl.com/9pqdyu
A more wrong-headed approach than cutting the money to keep school-teachers from being laid off while giving a big tax credit to those already comfortably-off enough to consider buying in this environment I can't imagine.
Tax cuts-- unless it's on the payroll taxes that make up most of the tax-burden on the people most likely to spend it -- generally provides no stimulus at all. The unemployed get nothing and the worse the situation -- and it's grim folks-- the past year is the first time I've heard any mainstream economist talk about a real possibility of Depression in this country-- the more likely people are to save anything that comes their way.
Cutting the very portions of the stimulus bill designed to provide new or keep existing jobs makes the whole package more expensive-- (because you not only lose the tax-revenue of the unemployed but have to pay out unemployment and other benefits) it affects business where it matters most-- in sales.
Smart business people know this: As one of them said on the radio today in response to another small businessman's complaint about taxes, "Come on-- which would you rather have? A 1 million dollar government contract-- or tax relief?"
There won't be any new business investment if people aren't buying, and they won't buy if they don't have jobs. Further more, we have a badly deteriorated infrastructure -- the very definition of public goods, which only government is going to invest in. If ever there was a time for big public works projects it's now. How many more levees breaking and bridges collapsing do we need to 'get' that?
And on the business front, again-- how about helping small businesses for a change-- the ones that employ most people-- instead of letting the SBA define fortune 500 companies as 'small' and giving most of our tax money to giant, international firms? Or how about helping people start small businesses when they're laid off? My German friend just started her own small business with a grant from her government-- and they're giving her 6 months of free business coaching to start her out as well!
And of course, there's the whole health care issue... Just about every developed country in the world except us takes the health insurance burden off of business. Yet here, we let insurance companies cherry-pick individuals and companies who are well and force them off the plan with drastic insurance hikes as soon as they actually need the insurance!
Okay, /rant off. I've already written to the senators of 4 states. I just wish there were more I could do.
I don't think anyone will be surprised by these reasons, but it's nice summary.
From Marketwatch: Five Reasons Not to Buy a Home This Year
MM,
Too late. I don't want the gov't holding my money any longer than necessary. Though I could file an amended, that gets tricky.
Still ain't happening. I'm not going to rush. It's not like there aren't three more for sale in the subdivision at approximately the same prices. And when this one does sell, it'll make a nice comp.
Patience.
What do you all make of the fact that the President did not mention any 15k tax-credit for home buyers in his press conference? Do you think Calculated Risk could be right and that it'll be an easy cut in the conference?
One can hope.
(says me who's planning on buying this year anyway, and could really use it to finish paying off our car loan in one fell swoop with some leftover)
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