As part of the ongoing discussions in the U.S. Senate relative to the economic stimulus package under consideration, it appears there has been some interesting developments related to the housing market.
Yesterday the Lieberman Isaacson Amendment was passed by a unanimous voice vote yesterday in the Senate. This amendment provides a tax credit to all home buyers at the rate of 10% of the sales price of a home up to a maximum credit of $15,000. The credit in the amendment would be available for one year period to all purchasers of primary residences (sorry investors).
There is an additional Amendment (353) proposed by Sen. Ensign (R-NV) that would also provide for 30 year fixed rate financing at a rate of approximately 4% for anyone purchasing a primary residence. At the time of my writing of this blog entry action had not been taken on amendment 353, however, it had been brought to the floor.
I am still searching the U.S. House and U.S. Senate to find the full narrative of the amendments as clearly the devil will be in the details (for an idea of how complex this legislation is, check out the actual “printer friendly” version) . However on their surface, these two proposals, if retained in the final version of the stimulus package, could provide a much-needed jumpstart to the housing market.
Now this does not mean we should expect to see a return to 20 to 50% annual appreciation rates throughout the country. In fact over the next 12 to 36 months having housing appreciation rates simply matching the underlying core inflation rate will be appreciated (no pun intended). By creating an environment in which appropriate credit liquidity returns and allowing excess inventory to be absorbed, we may find many markets throughout the country returning to a more balanced state.
However, making home purchases less costly in and of itself will not turn around the economy (or the real estate market for that matter) as it is job growth and its corollary income growth that are the key drivers to a healthy real estate market. Interest rates can be 0% but still not affordable to an unemployed family. Job creation coupled with income stabilization will provide the basis for an ongoing and sustainable economic recovery.
Comments(2)