Tuesday, January 11, 2011
Mortgage Restrictions are slowing real estate recovery
From what I am hearing from the brokerage community interest in properties currently for sale have increased since the beginning of 2011, which makes sense since as it has historically been slower bretween Thanksgiving and New Years, and in 2010 maybe even a little earlier. But from what I see on the offers we are being presented, loan restrictions placed on potential borrowers and properties has made the effort to buy and sell a home more cumbersome on the consumer and could slow the real estate recovery through 2011 while our overleveraged mortgage system tries to catch up to itself. Prices and rates are more affordable than they have been in many years. However, the restraints being placed on the lending process, including the amount of reserves required by the lenders from borrowers, increased down payments, seasoning requirements, and multiple appraisals reviews that take long periods of time are making it harder for buyers with the best of credit to close title on their property timely. The system has to ease up so credit-worthy, gainfully employed home buyers can take advantage of the tremendous opportunities that abound today. I also think the government could help by providing a stimulus to first time buyers. Obviously there is a tax cost in any incentive the government might offer. But when you think of the income that flows from the transaction, even a small stimulus offering that could spur increased activity will generate more tax dollars in the form of transfer tax and state and federal income tax than the incentives will cost, and will help employment by providing more opportunity to ancillary service providers who provide services and goods to the homeowners post sale. Look at the increase generated in sales until the Obama administration ended the new buyer stimulus package in mid 2010, at which time real estate unit sales fell over 20% across the country. God Stopped making dirt a long time ago, but hasn't stopped making people. In the long term the people will overtake the dirt and pricing will follow supply and demand. But in the short term, anything can happen, and as Real Estate goes so goes the country, employment and the hopes and dreams of so many. I wouldn't advocate the government infusing an overdose, like they did when mortgages were given with wreckless abandon, which is what got us here. But a little medicine is needed sometimes, I look forward to some meaningful input from the second two years of the Obama administration tenure.