Fixing the Housing Market

(From old blog WEDNESDAY, JANUARY 27, 2010)

If you’ve read some of my previous posts you’ll know that I’m not a big fan of some of the government’s programs because they do not help enough buyers or homeowners. Some problems they do not control, like why does it take up to 4 months or even longer sometimes to get a negotiator assigned to a short sale? Why are these same banks being unreasonable? Why does is it sometimes makes more sense for these lenders to just let properties go into foreclosure?

But there is a lot they can control. Currently they are offering home buyers money if they purchase a home. So if you happen to be in the market for a home, this is certainly a nice incentive, but by no means should this be the deciding factor when purchasing a home. In addition, how many of these people would have bought a home anyway? Maybe not as soon, but most likely within 6-12 months. And what happens when these incentives go away?

Now, I’m not one of those people who just complain and don’t have a solution (I don’t like those people) and my solutions were not all my ideas, but ideas I’ve seen or heard from other people as well.

First, eliminate the current incentives being offered. Our country has a big enough deficit, there is no need to print more money because of the housing market.

Second, make down payments tax deductible and make it available to all purchasers. This would encourage home buyers to save a little more money prior to purchasing which would benefit them as well as lenders who lend them the money. Better loans should also allow for lenders more willing to lend more money as well. It would also be an incentive for investors.

Third, raise the limits on FHA loans. If the government insists on throwing money into the housing market then this would be the place to do it. Being that the government owns Fannie Mae and Freddie Mac and are basically just using them as an additional finance arm of the US government, they could increase the loan amount limits. It was recently announced there would be stricter loan qualifications for FHA loans (which I agree with), but take it a step further and raise the limits as well for qualified buyers.,br>
Fourth, offer investors a tax incentive. I already said I think they should make down payments tax deductible so that would qualify as a tax incentive for investors. But another option is to offer a lower capital gains tax for as long as they own the property or at least 5-10 years. I wouldn’t offer both incentives, the investor would get to choose the option.

I’m hopeful over the next couple of months some of these ideas will make their way to Congress and we can start to stabilize this housing market. I’ve listed my ideas, what do you think?

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