The Real Estate Bloggers

The Senate last night passed an extension of the $8,000 Home Buyer Tax Credit for new home buyers and added on a $6,500 bonus for those who are buying a new home and have lived in their old home for 5 of the 8 previous years. The House of Representatives is expected to pass the bill and the White House has said they will sign it.

So what does it mean? I think most of those that wanted to buy and were conscious of the benefits of this government handout have already taken advantage of it. So to not have a complete flop, the government added the $6,500 kicker for those who have already owned a home.

This is one of the few things the Federal Government has done that has actually worked in the past couple of years. Congress persons needs some success to take home to their districts, and if they turn the home buyer tax credit from a success to a failure with the extension it would be a mite bit embarrassing.

The extension, according to Walter Molony, a spokesman for the National Association of Realtors in Washington, D.C., would require homebuyers to have a contract in place by April 30, but they then would have 60 days to close on the house, which would give them until the end of June.

The bill also would extend the credit to existing homeowners for a lower dollar amount — $6,500. Existing homeowners would have to have used their current home as a principal residence for at least five of the past eight years to qualify.

Cameron Findlay, chief economist for LendingTree.com in Charlotte, N.C., said the success or failure of the tax credit program will be regionalized because the impact of the $8,000 credit is greater in a state such as Pennsylvania, where homes cost less, than in California, where they are significantly more expensive. For the sake of comparison, Mr. Findlay said the average list price of a home in Pennsylvania is $286,000, while in California it’s $716,000. via the Pittsburgh Post Gazette.

A couple of quick questions:

• This program is expected to end April 30th, just before the summer peak market conditions. Will the elected officials have the intestinal fortitude to not renew the legislation at the end or will this turn into a permanent subsidy?
• The $8,000 new home buyer credit is available for those who have not owned a home in the past 3 years. The $6,500 credit is for those who lived in their home 5 of the 8 previous years. If you lived in a home for years 1–5 and then rented it for years 6–8 can you qualify for both credits?

The multiple listing services around the United States may be wise to watch what is happening up in Canada. Real estate leaders in Canada have been brought before the competition committee to see how the use of the MLS up there increases the cost of housing.

The Competition Bureau of Canada is playing its cards close to its vest, but it confirms it is leaning on the real estate industry nationwide to “voluntarily” ease rules that impose high costs on sellers who use the ubiquitous Multiple Listing Service.

And the bureau has some big sticks to wield if it doesn’t get its way. A spokesman notes it can impose administrative penalties of $10 million to $15 million, or it can directly order a change in the practices that force home-sellers to choose between paying five-figure commissions or having their listing excluded from MLS, which is by far the largest point of contact with potential buyers.

A letter from the Ottawa-based Canadian Real Estate Association to its 100-member associations has been leaked around the southern Ontario media. But, never mind that the horse is gone, the Vancouver Real Estate Board is steadfastly holding the barn door shut, refusing to release or comment on the letter.

Because the MLS systems in the United States are diffuse and regionally based, the chances of a one time intervention are much slimmer. The rules and regulations they have are reminiscent of a cartel that is designed to limit competition and create additional expenses for buyers. With the alternatives from companies such as Trulia and Zillow waiting in the wings, if the government decides to go after the National Association of Realtors and the MLS infrastructure for anti competitive behavior, it could be a nasty fight.

And potentially very beneficial for the consumer.

How do you make billions of dollars and screw every taxpayer, millions of pensioners, and get away with it.

Work for Goldman Sachs.

That seems to the be the story of the housing crisis as reported by McClatchy in a special report. And the worst part, there will be no consequence for the company, the politicians that helped create this mess, and those who lost huge amounts of money.

Check this out:

McClatchy’s inquiry found that Goldman Sachs:

• Bought and converted into high-yield bonds tens of thousands of mortgages from subprime lenders that became the subjects of FBI investigations into whether they’d misled borrowers or exaggerated applicants’ incomes to justify making hefty loans.
• Used offshore tax havens to shuffle its mortgage-backed securities to institutions worldwide, including European and Asian banks, often in secret deals run through the Cayman Islands, a British territory in the Caribbean that companies use to bypass U.S. disclosure requirements.
• Has dispatched lawyers across the country to repossess homes from bankrupt or financially struggling individuals, many of whom lacked sufficient credit or income but got subprime mortgages anyway because Wall Street made it easy for them to qualify.
• Was buoyed last fall by key federal bailout decisions, at least two of which involved then-Treasury Secretary Henry Paulson, a former Goldman chief executive whose staff at Treasury included several other Goldman alumni.

The firm benefited when Paulson elected not to save rival Lehman Brothers from collapse, and when he organized a massive rescue of tottering global insurer American International Group while in constant telephone contact with Goldman chief Blankfein. With the Federal Reserve Board’s blessing, AIG later used $12.9 billion in taxpayers’ dollars to pay off every penny it owed Goldman.

These decisions preserved billions of dollars in value for Goldman’s executives and shareholders. For example, Blankfein held 1.6 million shares in the company in September 2008, and he could have lost more than $150 million if his firm had gone bankrupt.

With the help of more than $23 billion in direct and indirect federal aid, Goldman appears to have emerged intact from the economic implosion, limiting its subprime losses to $1.5 billion. By repaying $10 billion in direct federal bailout money — a 23 percent taxpayer return that exceeded federal officials’ demand — the firm has escaped tough federal limits on 2009 bonuses to executives of firms that received bailout money.

So you have the sitting Treasury Secretary, Henry Paulson who (surprise, surprise) was the former head of Goldman Sachs, calling the current head of the company for advice on how to manage the housing and lending crisis. And the results, the decimation of a competitor and a bailout of Goldman with taxpayers money.

Oh, and did I tell you, Goldman Sachs reported record earnings in July when most of the other financial companies were still losing money hand over fist.

So lets recap, Goldman lent billions of dollars to homeowners who could not pay. Then they sold the debt as grade AAA to pension funds who lost a fortune. Then got huge bailouts for their poor investments while orchestrating the demise of it’s rivals by selective government participation coordinated by a former chief exec of the company who is now the Treasury Secretary.

Absolutely horrifying in my book. But with their ties to government and the scandal that would occur if this became widely known, will never be fully investigated or prosecuted.  

If you are renting and money is tight, call your landlord and see if they can give you a reduction. A new survey shows that 69 percent of landlords will be willing to lower the rent for tenants that are struggling if they are asked and the request is legitimate.

Most tenants will not pay the rent or pay it late when money is tight. This can hurt their credibility and create long term hardships down the road. From the landlords perspective, eviction and finding new tenants are an expense they would prefer to avoid. So when a good tenant is having rough times and approaches the landlord, there often is a deal that can be worked out.

So don’t blow off paying the rent if money is tight, instead call your landlord and work out a deal It is a win win for both of you.

Nearly one-third of these landlords (32%) say they have lowered rents over the past 18 months, according to an informal survey of association members released today.

Just like everyone else in this recession, landlords are trying hard to pay their mortgage and cover their bills. As long as renters pay on time and take good care of where they’re living, landlords will work with them, Benson said.

Tracey Benson, president of The National Association of Independent Landlords, points out that in today’s tough economy, renters absolutely should approach their landlords if they need help making ends meet.

“Just like everyone else in this recession, landlords are trying hard to pay their mortgage and cover their bills. As long as renters pay on time and take good care of where they’re living, landlords will work with them,” Benson said.

Of those landlords willing to negotiate, 61% said they would drop rents up to 5%, and another 29% said they would take off up to 10%; the handful of those remaining said they would consider even steeper discounts.

read the rest at The National Association of Independent Landlords.

New Home sales dropped in September as buyers decided this may not be the time to purchase a new home. Single family homes sales were down nationwide by 3.6 percent.

What is interesting is that the National Association of Home Builders used the downturn as a call for Washington to increase the $8,000 new home buyers subsidy. Now I understand why, that is $8,000 more per home the government will give the builders towards the price of a home, or if we want to be technical, $8,000 that the home price does not need it to be lowered for the house to be priced right.

The inventory of new homes on the market continued downward for a 29th consecutive month, to 251,000 units in September. This is the lowest inventory since November 1982. However, the slower pace of sales kept the months’ supply unchanged, at 7.5.

Crowe noted that the Midwest, which unlike all other regions posted a significant gain in September home sales, was one area where buyers still had a last-minute opportunity to sign a deal in time to take advantage of the tax credit because of the lesser volume of sales in the pipeline.

On a regional basis, new-home sales were down 10 percent in the South, which is the nation’s largest housing market, and were down 10.6 percent in the West. The sales rate did not change in the Northeast in September, but gained 34 percent in the Midwest due to last-minute deals sparked by the tax credit.

Everyone keeps talking about a bottom forming, but how can that truly be if both interest rates and property values are both being stimulated by tax dollars. A bottom is when the market, not the government, decides it is. If the government does not have the confidence in the market that it has to throw money to keep the market from tanking, we do not have a bottom.

And until we have a true bottom, we are not going to have market that most people will feel comfortable buying into. We may stabilize the ship with these subsidies but we will never make it sail efficiently until we set it free.