Gary L. Teeter

for Ohio Senate
      33rd District
 

To strengthen and rebuild the economy By Pro supporting


 

Gary's Views

 Housing and infrastructure have always been a vital key to our strong economy. Lately the housing sector has experienced its worst storm since the great depression. The housing sector has proven to be one of the fastest vehicles for economic recovery. The housing sector immediately  returns people to work and starts a chain reaction stimulus. This stimulus reaction benefits all types of manufacturing sectors, engineering, labor and management forces, as well as, sales teams with in all industries. As your Ohio Senator I will not hesitate to push for legislative measures that quickly and adequately promote healthy guidelines for continued home ownership and for updated public infrastructure that will keep America competitive.
   

Note

 These website articles are for bringing attention to issues facing our nation and world today. The links to the sites that host  their featured information are listed so that you may visit them to view and derive your own conclusions and opinions.
 

visit: http://www.fixhousingfirst.com/


The Problem

Falling home values are at the core of the current economic crisis

Our nation’s economic downturn began with the collapse of Fannie Mae and Freddie Mac in mid-2008. From there, the ensuing bank failures were largely driven by failing mortgages and ensuing foreclosures at rates never seen before. These conditions spawned an unprecedented cascade within the housing market…
  • Home prices and property values dramatically declined (and continue to decline) across the country;
  • Americans are now hesitant to buy homes because they fear prices will not stabilize anytime soon;
  • Net sales have fallen 72% from January 2006 to September 2008;
  • Existing home inventory is nearing an all-time high and increasing as foreclosures flood the market;
  • Falling home values translate into less tax revenue for local and state governments, placing a severe crunch on budget for essential services;
  • Thousands (soon to be millions) of jobs across all industries have been lost as a result of the housing crisis; and
  • All sectors of the economy are affected because housing is so central to our daily lives.

The following chart demonstrated the sharp decline in home values:

Historical Home Prices - First time ever, that the year over year change was negative
 

Lastly, as foreclosures continue to climb, inventory will continue to skyrocket as home prices continue to fall.

Mortgage Foreclosure Jump, Likely to Depress Home Prices

Unfortunately, the foreclosure crisis continues; delinquency rates were at 6.4 % in the second quarter of 2008, indicating significantly more homes are headed towards foreclosure.

To truly turn our economy around, government must address the housing crisis.

 
   
 
 
 

How to Fix the Housing Crisis

Short-term, targeted incentives will encourage Americans to buy homes again.

Earlier in 2008, Congress took initial steps to stimulate the housing market. Specifically, Congress adopted a measure providing first-time home buyers with a tax credit of up to $7,500.

Despite best intentions, the legislation failed to either stimulate or stabilize the market. The measure's failure can be attributed to three core factors:

  1. The tax credit was really a loan — recipients are required to pay back the entire amount through $500/year payments.
  2. The tax credit was only available to first-time home buyers, who represent only 30% of all buyers
  3. $7,500 was not enough to entice those considering whether to buy.

The credit was available beginning April 9, 2008, and expires on June 30, 2009. The following chart demonstrates the credit's lack of effect.

Clearly, more needs to be done to stimulate the market. Specifically, Congress should:

  1. Enhance the initial Home Buyer Tax Credit:
    • Eligible purchases: Primary residences between April 9, 2008, and December 31, 2009.
    • Credit amount: 10% of home price capped at 3.5% of FHA loan limits (geographically dependent) — ranging between approximately $10,000 and $22,000.
    • Eliminate the recapture — a true tax credit.
    • Monetization: credit available at time of closing.
    • Available to all home buyers and not just first-time home buyers.
  2. Couple the enhanced tax credit with a below market 30-year fixed-rate mortgage for home purchases
    • 2.99% rate available for contracts closed between now and June 30, 2009.
    • 3.99% rate for contracts closed between June 30, 2009 and December 31, 2009.
  3. Continue foreclosure prevention measures to keep people in their homes, help stabilize home prices and bolster the economy.

Together, these measures will stop the fall in home values, encourage people to buy now, create job opportunities in numerous sectors, and energize the broader economy.

 

The Effect

Reviving demand will positively affect the global economy.

While housing is at the root of our economic crisis, it can also be the spark that turns the economy around.

Despite best intentions, the legislation failed to either stimulate or stabilize the market. The measure’s failure can be attributed to three core factors:

A short-term, meaningful tax credit coupled with a below-market mortgage will get homebuyers back in the market quickly. With market activity, housing inventory will drop, stabilizing both home prices and home values. In turn, delinquent mortgages and foreclosures will markedly decline, shoring up financial institutions.

Importantly, a housing stimulus goes well beyond homebuyers. Increased property values positively affect all home owners, restoring consumer confidence to resume normal spending.

In addition, a stable housing market creates millions of jobs across the country in every sector – raw material suppliers, contractors, trades, furniture makers, and much more.

And it will not take long. A short-term housing stimulus will immediately motivate homebuyers and, thus, raise property values and home prices, shore up our financial systems, restore consumer confidence and create job opportunities.

 

visit: http://www.nahb.org/

 
  Housing’s Impact on the Economy. Noting that housing and related industries account for about 15% of gross domestic product in normal economic times, lawmakers were urged to support efforts to keep housing at the top of the federal agenda; the national economy will not recover until the housing sector does.
 

Housing Tax Incentives. President Obama’s fiscal 2010 federal budget proposal would cap the value of the mortgage interest and real estate tax deductions for home buyers and home owners. This would increase the cost of housing for many middle-class families, particularly in high-cost areas such as California, the Northeast and other major metro markets. Chipping away at these deductions is not the answer to raise additional revenues in the current economic climate; it will only hurt the ailing housing market and economy. NAHB urged lawmakers to reject this proposal in the President’s budget because it would undermine the nation’s housing markets, which are reeling under the current recession.

Within 48 hours following the Legislative Conference, the House and Senate Budget Committees each approved their respective $3.5 trillion fiscal 2010 budget proposals using Obama’s blueprint as a guideline. Unlike the Obama plan, the House and Senate versions would not cap the value of itemized deductions such as the mortgage interest and real estate tax deductions.

Housing Finance System Reform. While it is essential to correct the regulatory shortcomings that contributed to the ongoing crisis in the credit and housing finance markets, NAHB urged lawmakers to carefully study proposed legislative solutions to ensure that they will not impede the availability of financing for creditworthy mortgage borrowers or unnecessarily limit homeownership opportunities.

NAHB also recommends retaining a specific charter for institutions specializing in housing finance (thrift charter) and establishing housing finance focus and expertise in any future bank regulatory structure. Finally, NAHB called on Congress to continue to provide support to the primary and secondary mortgage markets in order to ensure available and affordable mortgage credit in all geographic areas and under all economic conditions.
 

 

 

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