Friday, October 17, 2008

Real Estate Industry Calling For Another Bailout

Fresh off our $700 billion bailout of the financial industry, the National Association of Realtors (NAR) and the National Association of Home Builders (NAHB) are calling for another stimulus package, this time aimed at the housing industry, according to Inman News. One of NAR's suggestions is for the government to eliminate the need for homeowners to pay back the $7,500 first-time homebuyer loan that was part of one of the previous bailout packages; in addition, they would like to see the $7,500 offered to everyone, rather than just people who haven’t owned a home in the last three years.

"Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving forward as quickly as possible," NAR President Richard F. Gaylord said in a press statement, according to Inman News. Translation: We need to inflate the price of real estate so people start buying property again and our members don’t go broke. What do you expect the president of NAR to say? Of course he is going to do whatever it takes to ensure the livelihood of his members; after all, without them, he is out of a job. Take what anyone at NAR, or NAHB for that matter, says with a grain of salt. Just for fun, though, let’s talk about his proposal.

The first questions that come to my mind here are, what are the benefits, and how much is it going to cost? I suppose the ultimate benefit here is that somehow lighting a fire under the real estate market jumpstarts the economy and everything is back to roses and sunshine. Reality, though, is that even if this measure were to invigorate the market, we will simply be repeating the same mistakes that got us into this whole mess in the first place. This time, instead of keeping rates too low and allowing the market to take off, we will be one-upping ourselves by actually paying people to buy houses. So what would stop this from blowing up in our faces again in the future? I think you can see the point I’m trying to make here, so let’s move on to the cost.

NAR, of course, didn’t give any mention of how much this wonderful plan might cost, but let’s hypothesize here. Say 8 million homes are purchased across the country next year; with each buyer getting $7,500, that would end up costing taxpayers $60 billion. Sure, that seems like chump change compared to the $700 billion bailout plan, but let’s not lose sight of the fact that $60 billion is a lot of money. And considering that we would have to borrow this money to pay it out, the real cost is only going to increase from there. No matter how you spin it, I feel that we would be absolutely crazy to pass something like this, but I’ve felt that way before as well and the government didn’t listen.

1 comment:

Anonymous said...

Is his last name Gaylord? Jeez!