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Stimulus Bill Preserves Real Estate Mandates

February 14, 2009

Here’s our take on the Stimulus Bill and Treasury announcements made this week. We look at the Stimulis package AND the Treasury’s package holistically, in compliment with each other – mostly because that’s how the Obama team is looking at it. Your representatives, the NAR Board of Directors, asked us in November to do 4 things (with an unspoken but clearly understood mandate to PRESERVE what we already have):

get loan limits raised for high cost areas
make the $7,500 tax credit NOT a loan
try to find ways to push interest rates down (which are higher
than they should be due to systemic risk right now) by 200 basis points
help provide solutions to the foreclosure/short sale problem.

So here’s what we have achieved:

the loan limits will be raised to $727,000 in high cost areas
the tax credit will be raised to $8,000 with NO payback [a true credit]
interest rates have come down 125-150 basis points
the bill has over $50 billion in it for foreclosure mitigation, with Geitners
Treasury plan signaling that the second half of TARP and TALF will be used
to mitigate foreclosures through a government guarantee, drive down
interest rates by buying another $200-300 billion of mortgage paper from
the GSES’s thereby freeing them up to do the same with new mortgages,
Fannie has just agreed to lift the cap of 4 investment properties eligible for
loans and raise it to 10.

In addition, we preserved what we have — which some tend to forget is always on the table when these negotiations start up again — an overall package worth more than $100 billion and for some a very attractive funding source for their pet projects).

mortgage interest deductability
real estate tax deductability
the $250,000/$500,000 cap gains exclusion.

We did make a run at the $15,000 credit — and we would have loved to have gotten that or the Homebuilders $22,000 credit idea as well as their 5 year loss carryback deal, but they were considered too rich for this program. What it did do though is totally take the debate off of whether a tax credit should be reinstated at all (it expired last year) and whether it was a true credit or a repayable loan, and kept the conversation on how much it should be. It also kept the debate off of ‘what we are willing to give up to get a $15,000 tax credit’ and kept the debate again, on how much it should be.

It’s pretty hard to complain when they give you what you ask for and you lose something you never had.

While we study the Treasury specifics on their major role in providing the rest of the housing solution — there is much more to come and we are working diligently with the Administration to help ‘unclog the pipeline’ and get capital flowing into housing again.

Sincerely,

Charles McMillan, CIPS, GRI
2009 NAR President