HousingZone.com put out an article this week that looked at five of the more prominent plans to “save” housing. The plans ranged in scope, cost, and – frankly – sense… but overall the idea is that many of our state and federal politicians are putting their two cents in. The only problem is, the plans that make sense are the ones that are least likely to get implemented. They just aren’t politically palatable. Here are two big hints: 1) If it comes out of Congress – run for your life, and 2) if it bears the name of the bill’s sponsor, it’s likely more about bringing notoriety to the politician than it is about fixing the actual problem. Keep this in mind as we go through the following plans on how to save the housing industry one by one and evaluate them based on what we know of their authors and their details:
How to Save the Housing Industry
- Homestead: Act 2
This train wreck of an idea was proposed by U.S. Rep. Gary Ackerman (D-NY) and is based on the premise that homeownership will be encouraged if only the government would offer more subsidies for anyone (qualifying) who wants to purchase a
single-family home as their primary residence. Literally, the first 2 million borrowers who qualify would get a $20,000 matching down-payment loan, forgivable over 5 years. In short, if you can’t do it, why, the government should just buy your house for you. And to appeal to Republicans, the plan includes a provision to give 1 million investors a 10-year tax exemption on rental
income when they purchase a single-family home off the market. I thought this was the worst idea ever – but then I saw the next one… - The Spitzer plan
Here’s a hint: if it comes from New York or California run away – run away very quickly. Reagan as a complete fluke likely to never be duplicated again. Anything is possible, but don’t put your money on it. This plan, spearheaded by former New York Governor Eliot Spitzer simply forces banks to “fix it”. That’s it. Just write down the mortgages to current market values. I mean, what could be simpler? Aside from the nightmare of qualification paperwork and tedium involved, recent numbers put 20% of all US homes underwater. 20%. You want to put banks out of business quickly – enact this plan. Let’s watch the economy and stock markets tank overnight together – I’ll bring the marshmallows. - The Obama administration’s plan
Just kidding – he doesn’t really have one. He’s working on it, though. And when it’s ready (supposedly next week) it’s going to be… we have no idea what it’s going to be. Here’s our concern: the last place you want to see a politician lay out any kind of comprehensive reform or financial plan is around election time. There’s simply too much temptation to pander to your constituents as opposed to doing what is likely the very difficult work of facilitating the recovery. The best thing that could happen here (for housing) might be for the President to just hide until it’s all over. He hasn’t led so far, and jumping into something around election time will likely make it worse. If he gets behind a solid plan, that’s fine – but so far he hasn’t done anything of the sort. - The Huntsman plan
Presidential candidate and former Utah Governor Jon
Huntsman recently unveiled a 12-point “Jobs” plan that included a provision whereby Fannie Mae and Freddie Mac would be privatized. On top of that, he proposes to… *gasp… let the housing market “settle” so that economics and capitalism can actually have a chance to work. As part of this, Huntsman would propose scaling back homeownership subsidies. This is a start. Honestly, the intervention into the markets has got to bear a lot of the responsibility for dragging out the mortgage crisis beyond what it should have. Which brings us to the final plan: - The Foreclosure plan
We have to admit – we kind of like this plan. There are a host of economists behind it (which is to say there are also a host of them NOT behind it). Still, the basic idea is to let the stupid houses foreclose. If you are upside down in a house and can’t afford it, it’s not because you were necessarily swindled – you simply had big eyes and signed papers that eventually put you in the predicament you are now in. You bet on a never-ending increase in home equity and/or job stability and lost. Essentially, this plan seeks to hurry up the foreclosures and get through the crisis rather than drag it out further and further, spending money that no one has and bankrupting our nation to save the banks and people who thought it was perfectly logical to buy a $600,000 house with no money down on a combined income of $75,000/year.
There are a lot of plans on how to save the housing industry. We tend, around here, to favor the ones that don’t spend taxpayer money on failed policies to prolong the foreclosure process. It’s OK to lose your house. That’s not the worst thing that can happen to a person. Renting is not evil, and health is more important. With that said, this scrambling to print and spend money we don’t have to prop up a housing market that, by all we can foresee, simply needs to work itself out – that’s lunacy.
We want the best for consumers and business. We’re not sure what that it, but we’re keeping our eyes out. What’s your opinion of the market? What’s the best plan on how to save the housing industry at this point?
