There are a couple of good articles today in the Orlando Sentinel.
Orlando Real Estate December 2008
First Time Home Buyers Orlando
Read these, and then go back and read my posts in October, November and December. Prices are at rock bottom right now, and interest rates are right there with them. You could say that both are artificially low right now as a result of the foreclosures in the market and the stimulus efforts so far. The article mentions that it is estimated that 40% of the sales are distressed. I think it is closer to 50%, but 40% is a number that has been kicked around in describing the national market. Either way, it is safe to say that it is a big enough number that it is effecting the median price of homes. I am not sure, but it seems like once the banks started getting their big bailout checks, they started to get more aggressive on their REO prices. I'm an optimist, so I'll take the leap and say that the $350BB loosened that up. Of course The Fed is pumping half a trillion into mortgage backed securities to push interest rates down.
Every market is different, but consider this. Congress to date has authorized $700BB, and The Fed cannot buy all $4.5 trillion in mortgage backed securities. There are limits to the resources available to continue holding prices and interest rates down. If Mr. Obama wants my two cents on his next stimulus package, or if Congress would really like to kick start things in productive way consider the following: real estate created this current situation, real estate can get us out of this financial malaise. I have read estimates that 66 people touch each real estate transaction. That is a lot of jobs, and I don't believe that accounts for all the after sale activity associated with a home purchase. Take the next $350BB, and put it directly in the hands of home buyers. All categories of home buyers could use cash for down payment assistance.
Let me tackle the argument that 100% financing is the cause of all our woes, since people see down payment assistance as creating a situation where the home buyer has "no skin in the game". It is true that a lot of the sub-prime loans were 100% financing situations. The problem in our real estate market was created by a low supply of housing that fueled panic buying and greedy speculation. With home prices dropping about 35% here in Orlando over the past couple of years what difference would it make if you put 10% down? Trust me, I believe you should save to purchase a home, but right now it is hard to do that for many people who would like to buy. Why not offer a credit toward down payment for primary residences that is paid back over 15 years like the current First Time Home Buyer Tax Credit.
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