Community News

I recently had the opportunity to be a part of a conference call with other real estate brokers throughout the country to listen to the unveiling of Business Roundtable’s new recommendations on how to re-energize the housing market in the United States. Richard A. Smith, the CEO of Realogy (the organization of which ERA Landmark is a franchisee), has been in Washington, D.C. serving in the capacity of chair of the Business Roundtable’s Housing Working Group. The Business Roundtable is an association of chief executive officers of many leading companies in the U.S. The group’s objective was to develop ideas on how to improve the current housing market, which in turn should stimulate economic growth as a whole. These solutions were then passed along to Congress and the White House for consideration. There are five main proposals, rewritten verbatim, listed below along with some explanation of the thought processes behind them. 

1. Keep mortgage interest rates at historically low levels (below 5 percent) for at least one year; 

The hope is for policymakers to keep up the efforts to hold rates at or below 5 percent. It is believed that many qualified buyers are holding off on purchasing a home anticipating that rates will fall even further. If the rates were guaranteed to remain below 5 percent, but for only a finite period of time, home buyers would then have the peace of mind and incentive to make their purchase decision and act before that set expiration date.  

2. Expand the current First-Time Homebuyer Tax Credit incentive from the lesser of 10 percent of the purchase price of the home or $8,000 to a higher limit of either 10 percent or $15,000 for all homebuyers, remove the income restrictions and include all primary residence purchases for one full year; 

The logic behind this proposal is that while the First-Time Homebuyer credit has shown some success in moving properties in the lower-priced segments of the market, there needs to be assistance for those who already own homes and are in the “trade-up” position. Helping existing homeowners purchase a new home, it will prompt even more home sales by way of selling the current home and then buying the new one. Additionally, the current income restrictions in place to December 1, 2009, are limited to buyers with incomes under $170,000 for married couples and $95,000 for individuals. Removing or even modifying this limit could open the market up further and stimulate the mid-to-jumbo markets which have essentially stagnated. 

3. Conduct a thorough review of current foreclosure mitigation and loan-modification programs in light of rising loan-modification re-default rates; 

There have been many efforts underway regarding foreclosure mitigation, but close monitoring and a willingness to make changes on an ongoing basis, as needed, will be the key to stopping the rise of re-default rates and keeping people in their homes. 

4. Make permanent the current temporary conforming loan limits;

The previous limits were equal to the greater of 125 percent of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie Mae and Freddie Mac. The overall maximum temporary limit is currently $729,750 in most areas, which is an increase over the permanent high-cost limit of $625,500. Unless legislation is amended, the temporary loan limits are scheduled to expire on December 31, 2009. 

5. Continue to review and strengthen government efforts already underway to review and refine mortgage lending practices. 

Underwriting and risk management are key to maintaining the health of the financial markets so that credit-worthy households of low to moderate income continue to have access to credit.
 
It was reported in Bloomberg News that Senators Johnny Isakson (R-Ga.) and Christopher Dodd (D-Conn.) have already planned to co-sponsor a bill in conjunction with the 2nd recommendation above. Of course, the legislative process is often a long one, but ideally, these measures can be advanced with enough support. 
 
The National Association of Realtors® is pleased with the results of the Business Roundtable’s meeting and the ensuing recommendations which strongly mirror their own convictions along with the belief that in order for the economy to recover, the housing market must be stabilized. The Housing Working Group’s Summary Statement exemplifies this position and is included below.
 
“Business Roundtable’s Housing Workforce Group strongly believes that stimulating the housing market from a demand-side perspective is the key to putting America back on the path to economic growth. Housing-related industries accounted for approximately 21 percent ($14.3 trillion) of U.S. gross domestic product. Therefore, the recovery of the residential housing market is vital to the recovery of U.S. financial markets and the overall economy. The housing market continues to be a downward drag on the economy; if it is not corrected or stabilized, the tide of the recession is not likely to reverse in the near term, the slide in the economy overall will continue.”
 
As with any set of optimistic and goal-oriented objectives, only time will tell if these recommendations will come to fruition and accomplish what they planned to do. However, staying in a proactive mode is what will ideally turn the real estate market around by instilling buyer confidence to help prompt purchases of the ample inventory and vast selection of homes on the market.