Detroit automakers recently received the cold shoulder from Congress on their quest for a piece of the $700 billion bailout pie; next in line are the homebuilders. Hopefully they will learn from the automakers and won’t fly to Washington in private jets to beg for these funds, although at this point it appears doubtful that their wishes will be answered anyway. The homebuilders are prepared to request an aid package estimated at $250 billion and aptly called “Fix Housing First”, according to the Wall Street Journal. The homebuilders are trying to convince Congress that the rest of the financial system will continue to deteriorate until home prices stabilize.
The “Fix Housing First” plan calls for two parts, a large tax credit for homebuyers and a government subsidy of mortgage rates. The tax credit that the homebuilders are proposing would equal 10 percent of the home’s purchase or $22,000, whichever is less according to the Wall Street Journal. The mortgage subsidy requested by the homebuilders would aim to bring interest rates on government backed 30 year fix loans down to 3 percent for loans made in the first half of 2009, and 4 percent for loans made in the second half of the year, according to the Wall Street Journal. The Wall Street Journal also notes that Realtors are pushing a 4.5 percent interest rate buy down for new mortgage loans. It is their estimation that for each 1 percent that rates fall, 500,000 to 800,000 additional homes could be sold.
It seems very unlikely that any variation of the “Fix Housing First” plan will get passed before Obama takes office, but once he does all bets are off. I seriously doubt that the plan would remain intact as is, but some variation of the proposal could be possible. There is a lot of support for the idea that the housing crisis is the underlying cause of the greater financial crisis, and most Americans are more likely to approve of measures that will aid the housing and mortgage markets before aiding banks and other financial institutions. We have been trying to prop up the financial industry for a long time, without much avail. Why not give housing a try?
Of course the problem is that this will simply artificially inflate housing prices yet again. We did that before and look where that has left us. If we are able to inflate housing prices, that will alleviate many of the problems plaguing the financial industry and homeowners alike, but it is not sustainable. Housing simply became too expensive, and it will become too expensive again if we inflate it, and the next time it will cost us even more to fix the fallout. Housing prices need to rise in correlation with a rise in income, which is the only sustainable way. I hope that Congress and the next administration know better than to rely on biased research when looking to spend hundreds of billions in taxpayer money.
Homebuilders gambled and lost.Eat it!Why should the gov't bail THEM out?Why can't they give homes away and write off the loss?A lot of this mess their fault anyway.
In the meantime, realtors still command a hefty 6% (3% seller's agent plus 3% buyer's agent) commission whenever a house changes hands. That wipes out almost two "normal" years of house appreciation, and is wholly unreasonable.
As long as they keep charging these insane commissions, things aren't too bad for them. Should a simple listing in the MLS plus a couple photos cost more than a wedding ? I don't think so.
I hear people complain about real estate commissions a lot, but the truth is you have a choice. If you feel that all real estate agents do is put your property on the MLS, then list your house with one of the growing number of companies that charge you a low flat fee to do just that. For a couple hundred bucks you can get your house up on the MLS with photos and everything. You will need to offer at least a 2% commission to the buyers agent to get any response, but 2-3% is better than 6%.
I will add though that there are good agents and bad agents. I've worked with bad agents that I think deserved a couple hundred bucks for the amount of work they put in, and I've worked with agents that I feel were a bargain at 3%. So while it is possible that you simply might have worked with bad agents, the more important thing to remember is that ultimately you have a choice. Beyond the flat fee listings, you can always sell your home FSBO.
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