Real Estate Markets- Supply and Demand
The biggest blame game in town has been played out with finger pointing, name calling and irresponsible remedies that are nothing more than a band-aid to the housing crisis.
We can talk all day long about what the government should or should not do but at the end of the day it can be reduced down to a very simple fact: SUPPLY and DEMAND.
We must decrease the supply and increase demand.
It is obvious that nothing has worked so far. They are looking at this from the wrong angle. Helping people stay in their homes mostly delaying the repercussions. The government reduces the principle and lowers the monthly payments when the homeowner is 90 days late on their mortgage or more. There is no incentive for the homeowner to get back on a regular payment plan when they are used to not making the payments. Only those people who really care about not having a foreclosure on their credit record are really going to stick to the payment plan.
The other problem this is creating is an entire neighborhood of people feeling the unfairness and saying why should that neighbor get a principle reduction but I don't get one. Soon it is 5 people on a block all wondering the same thing. They will all start to ask for the same deal.
The next problem is that when the government crams down principle and lowers interest rates the regular people who hold what they thought were safe bonds become a pawn in this game. Who owns these bonds? People like your grandfather and grandmother. How do you think they feel when the fed reserve freezes the interest rate on bonds and when you think you were going to get 6% return on your bonds instead you are stuck with 2%?
But the government can do some things right away to increase the demand for the houses.
How can they do that? The following incentives need to be put into place right away in order to decrease the supply:
- Give incentives to investors to buy properties and get renters in them. There are many vacant homes which add to the decline in their respective neighborhoods. This causes more declining values and increases the supply.
- Get a program into place to decrease the amount of foreclosed properties coming back into the market. Everything the government has tried so far, has not worked.
- The investor loans need to have a large down payment to incentivize the investor to stay with the property long term.
- Lower the depreciation schedule to 5 years for investors who buy foreclosures.
- Offer investors zero percent capital gains tax if they keep the properties for 5 years or more.That would stimulate an increase in demand very quickly. Tax incentive like these have been used very successfully in the past and will continue to achieve a positive result.
- Lower the mortgage interest rates. They are so far off of the Treasury. The difference needs to be narrowed.
Just printing more money to throw at the problem is NOT going to fix it. When we reduce it to supply and demand we can have the discussion of increasing demand and decreasing supply.
Contact Nestor Gasset and Katerina Gasset, CIPS, Realtors®, International Properties and Investments, Inc. Licensed Realtors® in Florida at 561-753-0135 to list your property for sale or to purchase a property in Wellington, Boynton Beach, Manalapan, Manalapan Point, Lake Worth, Hypoluxo Island, Lantana, West Palm Beach and the rest of Palm Beach County Florida and Port St Lucie Florida. We are accepting referrals.
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Real Estate Markets- Supply and Demand was first published on South- Florida-Luxury-Living.com.
Copyright © 2009 By Katerina Gasset, Real Estate Markets- Supply and Demand All Rights Reserved.
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