The existing real estate market is in decline and current forecasts do not see a significant rise any time soon. However, there are many variables that could affect this forecast. Being an election year, a new president, depending on the policies of his platform, may be able to change the economy to such an extent that the real estate market also changes. There is no guarantee that it will be for the better but it very well may affect change. This late in the game the front runners for the election are Barack Obama and John McCain.
Obama is a Democrat who has a proposed housing reform plan. His reformations include changes to the financial regulatory system to have stricter controls on financial institutions. Also in his plan is a system to help with the current foreclosure problem facing many Americans today. He proposes that the Federal government take steps to assist those who are in financial straits by buying out or refinancing existing mortgages to drop monthly payments.
Also, he wants financial institutions to restructure loans as early as possible when a borrower is having problems. In addition he wants to increase tax incentives for people who have mortgages so they can get a break on their taxes. His final initiative includes a federally funded program costing up to thirty million dollars to help with the existing foreclosure crisis facing America today.
McCain, a Republican holds that there should be little government intervention in the banking situation and that the economic issues should play out naturally. However, recognizing the crisis he is open to suggestion from leading authorities for temporary solutions for assistance in order to help the American public through the crisis. However, he maintains that any assistance should be temporary and any permanent reform should be in the means of regulatory changes and increasing the accountability of banks so that the crisis does not occur again.
He also insists that any financial assistance to the public should be for those in primary residences to save their home and no assistance should go to investors in trouble or those who have trouble keeping up a second home or vacation property. While McCain is amenable to analyzing the issue and open to discussion regarding possible solutions for both long and short term, he is non committal about what his housing policy is and refuses to make it a part of his campaign. He does not want to play on the fears of the public to win votes by touting a reform policy that is not feasible or would not pass.
Both Obama and McCain have recognized the existing housing problems in the country. Both have acknowledged a need for some type of reform. They do, however, disagree on how much government should be involved and in which aspects. Obama has a clear cut strategy for housing reform as part of his campaign platform but that does not mean anything will actually come to fruition if he is elected. McCain has been noncommittal in pinning down specifics but has stated it is something that will take precedence. How the market will unfold after the election, though, will depend not so much on who is elected but what will actually occur when they are. Right now, there is merely discussion and planning with nothing concrete evidenced by either side.
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1 comment:
Presidents have little effect on the housing market. When they have an effect on any part of the economy it is usually related to tax reform.
Gov't regulation is how we got in this mess in the first place - fed rules requiring lenders to loan a certain percentage of their investments to people who could not afford them. Additionally rules exist so the more loans Fannie and Freddie made, the more millions the heads of those organizations would get.
The housing market does not stand alone - it is related to the amount of credit that is around. Lots of money at cheap initial rates drives prices (and demand) up. When loans are not available the demand drops and so does the price. Fannie and Freddie flooded the entry level market with buyers which moved everybody up the ladder. Unfortunately, average home prices raced ahead of people's ability to buy and credit dried up.
The solution is more capital available to the lenders - not in the form of a huge investment by all of us tax payers and more gov't intervention in, and control over, the mortgage industry. We are making the same mistakes again. When bureaucrats decide who gets a loan, the market becomes artificial. There are billions of dollars in capital that belongs to US companies that could have solved this problem naturally. But our onerous tax code prevents these companies from bringing it back to the US. We are the only country that taxes offshore profits and have the 2nd highest corporate taxes on the planet. Money stays off shore, investment stays off shore, and jobs get shipped off shore.
We are at a point in our history where higher taxes are not the answer and a socialization of our markets will result in more job losses.
This is far from over. Gov't is the problem - not the solution.
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