Saving the Housing Industry: Sometimes the fix is worse than the problem

April 14, 2008 at 5:26 pm Leave a comment


from one of my favorite mortgage voices, David Reed, CD Reed Mortgage Bankers, Austin

During an election year you can bet your elected officials are doing whatever they can to “fix” something so they can show their constituetns back home they’re burning the midnight oil.

Sometimes the fix is worse than the problem…..

Saving the Housing Industry
Before we know it, we’ll have some sort of government “fix”…

The Senate and the House both are in competition to show how much they care about our national housing situation. The one that sticks out the most to me is the $400 billion given to cities to buy, fix up, and sell foreclosed homes. The idea is to keep home prices from falling any further.

I have two problems with this.

If foreclosed homes are just sitting there with no offers on them then why does the Federal Government think that a city (oh, I’m sorry, you and me) can buy them, paint them and suddenly they’ll sell? Does the Federal Government have better Listing Agents than banks do?

If homes haven’t sold I’ll just bet it has something to do with the prices being too high. They’ll have to come down some more before people will buy them. Prices go up, prices go down.

This proposal is nothing more than creating a false economy. Cities will buy properties, fix them up then wait for the bevy of borrowers to buy these new-found deals? Come on, this won’t work. If a house doesn’t sell it’s due to there being no willing buyers, at least at the price that’s currently being offered.

Would the banks object to such a plan? Why would they? They’ve been trying to sell their foreclosed properties with no luck. Suddenly the city comes in and writes them a check using money that belongs to you and me.

My second problem? Why is the government keeping housing prices from falling further in the first place? That’s the open market’s job. But for the sake of argument, okay, let’s step in and prop up the price.

But if that logic works then the reverse has to be true as well:

If the government thinks there should be a bottom for real estate prices they should also think there should be a “top.” After all, if the government stepped in a limited price INCREASES to say, 2% per year, then we wouldn’t be in this mess, now would we?

I say we’d better watch out for the unintended consequences of this nonsense. The heart might be in the right place but goodness gracious, what a precedent!

.

© Julie Nelson and The Nelson Project at Keller Williams Reatly, 2008-2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Julie Nelson and The Nelson Project at Keller Williams Realty with appropriate and specific direction to the original content.

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© Julie Nelson and The Nelson Project at Keller Williams Reatly, 2016-2020. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Julie Nelson and The Nelson Project at Keller Williams Realty with appropriate and specific direction to the original content.

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