dreaming about the housing market

[Fresh_Start]

Allow consumers whose houses are underwater to have a tax credit (or deduction if you can't stomach credit) for the loss compared to their purchase price from their income taxes: essentially they can 'mark to market' that asset. This should be limited to the primary residence of the consumer and not to investment real estate. I'd also consider that corporate personhoods could do the same for their primary residence if they (like human personhoods) do not currently deduct the operating cost of their residence from their tax returns (can't be unfair to corporate personhoods can we)?

Make the banks write down the asset on their balance sheet equal to the losses declared by the owners so that none of the consumers owe more on their home than the home is worth. For consumers with 2ndary mortgages, the two mortgage companies may need to split the loss but they can't stop the consumer writedown.

Getting people out of the underwater situation should make it less likely that people walk away from their homes due to financial reasons other than that they can no longer afford the home. It will also give people hope about continuing to live in their home and community. By getting back some of the taxes that they have already paid, the consumers will have more money to spend AND many of these people will spend the increased tax refund in the USA. This should have a multiplier effect. The estimate for the housing market underwater is approximately $700 billion dollars so it wouldn't be an insignificant stimulus.

Because the banks are forced to take the write down anyway they no longer have an incentive to deny sales in the faint hope that they'll some how get more money than the house is worth.

This will blow the crap out of the financial companies balance sheets (and probably kill a few very deserving CEOs due to heart attacks). But a little more truth in the financial markets is a requirement of a working market.

[Turbineguy]

1. It will never work.

The Free Market is not supposed to benefit ordinary people.

[Loge23]

2. Should of been done long ago

While I still like the idea, I fear it's too late for too many.
At this point of the disaster, many folks cannot even pay the market value mortgage.
The real tragedy of this situation is that, IMO, the housing crisis begat the economic malaise in which we now are mired.
So many jobs were lost when housing went bust: construction, government/municipal, retail, manufacturing, and ancillary services are all directly related to housing.
...and guess what: The banksters are doing fine.
What a horror and what a story that is being written in our history. Economic terrorism at it's most severe.

[Fresh_Start]

3. I agree that its late but I hold out hope that its not too late

to use the consumer to stimulate the economy.

For people who are losing their homes, the tax refund and the writedown and a now solicitous bank might mean that they can stay in the home.

IT won't bring back construction jobs until after the housing market is stabilized, but right now there is nothing to help stabilize that market.

[Loge23]

4. True - it can't hurt.

It would also, finally, share the pain with the entity that caused this problem. Up until now, that pain has been borne by the consumers.

[customerserviceguy]

5. Never gonna happen

And for a variety of reasons, it probably shouldn't. We need to accelerate foreclosures, especially of abandoned properties, so that we can hit the bottom of the real estate market, which is the beginning of the end of the recession/depression.

[sad sally]

6. Here's a prelude to what the Administration plans to do with all those underwater houses.

Doesn't sound too encouraging to me. While not spelled out here, one of the scenarios is to let outside investors (you know, those "people" with more cash than they know what to do with) buy bundles of unsold foreclosed homes (remember these were somebody's home), repairing them, renting them out.

The Treasury's plan is that the government could maintain ownership, sharing profits with the private investor, who would manage the property and split the equity when the property liquidates. After the program had ran for some time, the investor and the government would decide if they should continue being rented, sold or torn down.

Economist see this as a way to save the plunging home prices in the ailing American economy. Below is the notice to the real estate industry.


http://www.realtor.org/newsletters/washingtonreport/2011-08-15_washingtonreport#FHFATreasuryHUDSeekInputonDispositionofRealEstateOwnedProperties?du

FHFA, Treasury, HUD Seek Input on Disposition of Real Estate Owned Properties

On August 10, 2011, the Federal Housing Finance Agency (FHFA, the conservator of Fannie Mae and Freddie Mac (the GSEs)), the Department of Housing and Urban Development (HUD), and the Department of the Treasury announced a Request for Information to seek input on enhancing Fannie Mae, Freddie Mac and the Federal Housing Administration’s REO asset disposition strategies.

The agencies have requested information on potential structures and disposition strategies to facilitate the current and future disposition of REO properties that will help stabilize neighborhoods and local home values, and improve loss recoveries compared to individual retail REO sales. The agencies have outlined specific objectives that should be addressed by any potential structure or strategy, and anticipate that the objectives will be best addressed through “REO to rental structures” and have asked for specific information on potential rental partnership options for single-family REO properties.

Several NAR committees are discussing and will be providing input on the Administration’s request for information on the large scale renting of REO inventory. The feedback from the committees will provide guidance to NAR staff for a comment letter that will be based on member input. Responses are requested by September 15.