With the rise of the powerful federal government, policy decisions coming out of Washington DC are having more and more influence over our economic decisions. When it affects the auto industry or the banking industry, these decisions may affect those of us involved in real estate, but it will not change our lives.
However, now the federal government is looking to overhaul it’s regulations on real estate and housing.
Other critics say eliminating or overhauling Fannie and Freddie isn’t enough: The government must reconsider such bedrocks of housing policy as the mortgage interest deduction and the tax exemption of most capital gains from home sales.
They say these misguided or outdated government policies encourage the United States to massively overinvest in housing, shortchanging other parts of the economy. “There’s only so much subsidy to go around at the end of the day,” Katz says.
The administration isn’t tipping its hand in advance of a conference next Tuesday on housing finance reform in Washington. But officials insist that big changes are coming to housing finance. Treasury Secretary Timothy Geithner has said the reforms must: continue to make mortgage credit widely available; promote affordable housing for home buyers and renters alike; protect consumers from predatory lending; and promote financial stability.
“We have committed to having a proposal in place by early next year,” says Federal Housing Administration Commissioner David Stevens. “This is not about delaying. This is about being thoughtful.” via USA Today
Imagine waking up in 2012 that the government eliminates the mortgage interest deduction. How would that affect your business?
Imagine that Freddie Mac and Fannie Mae change their lending criteria? How would that affect your business?
Imagine FHA turns off the lending spigot and those loans go away? How would that affect your business?
These are not just vague questions. These are policies that are under review in Washington DC right now by the Treasury Department. There are people there who do not believe home ownership is a valuable part of the American Dream and are not eager to help families achieve this goal.
In fact, there are many in the present White House who believe that the mortgage interest deduction is an unfair give back to the rich and needs to go away.
Folks, let us be honest. Many of us work in an industry that is subsidized by the Federal Government. The rules have remained the same since 1945 so we have become very complacent. Yet all it takes is an activist White House, and I promise you this is an activist White House, to change the rules of the game.
So you should carefully watch what comes out of Washington regarding real estate and housing policy. There may be huge changes coming that may completely change the dynamics of how you earn your living.
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{ 9 comments… read them below or add one }
If this movement to eliminate home ownership as part of the American Dream is successful, it will destroy the real estate market and hurt so many good honest hardworking people. Yes, some changes are needed but not changes that destroy the real estate market.
What kind of weenie Dream needs a subsidy to survive?
Frank
Hopefully they help make financing a home a little easier. It's been very tough to go from zero down and no credit check, to 20% down and income tax returns for 5 years , every pay-stub you've ever received, and a sample of your blood.
I'm not sure exactly what you mean by "activist white house"; sounds to me like you've fallen prey to the whole "Obama's a socialist" baloney, however I could be wrong. I think you're getting a little ahead of yourself: 1) Fannie and Freddie need to change their lending criteria, that's just a simple fact, 2) FHA isn't going anywhere and I'm not sure how you got to that hypothetical "the sky is falling" type argument, and 3) while I don't agree with doing away with the mortgage interest deduction, its probably a good thing that our government is considering all options when looking to change our current lending system.
Have a little common sense when writing your blogs dude. The sky isn't falling, Obama's not a socialist, he's not against business (in fact quit the opposite), and the RE industry isn't going to fade away into nothingness……
Jason,
Let's see, we are printing money to give Freddie Mac and Fannie Mae a blank check. The FHA is already upside down, for the first time in their history, providing low end lending with only a 3.5 percent down payment to marginally qualified borrowers.
Add into it the Federal Reserve has doubled their balance sheet to 2 trillion dollars, taxes for small businesses, the heart and soul of job creation, are going up with the additional paperwork and reporting.
Oh, and most economists are predicting a double dip recession. Unemployment is stagnant at 10 percent without any real expectation of help in the near future and Social Security is running at a deficit for the first time. Since the lock box trust fund has been spent we have to raise taxes even more to cover the cost of our obligation to retirees.
Obama may not be a socialist but I stand by my call that his White House is an activist one. With the addition of the healthcare legislation it is definitely not been a passive White House.
The Housing policy by the Federal Government would definitely affect the real estate business and it might be possible the it will change the whole scenario of this business and the other business as well.
Awesome post! thanks for sharing with us. This is apparently a good sign of social policy, which will help the economy as well. However will affect the real estate business a lot. The loss or reduction of income was the primary reason of all this. The shift in approach could mean higher down payments and interest rates on loans, more barriers to lower-income people buying homes, and fewer homeowners.
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