Here is a simple solution to our real estate crisis.

By
Real Estate Agent

Help me understand.  Is this idea just too simple to have been overlooked in all of our politicians' discussions about how to solve our real estate crisis?

The other day, I showed 10 homes to buyers between $45,000 and $65,000. There were 49 homes on the market available and of those, 41 of the 49 were distress sales -- short sales or foreclosures -- and every one of them was in distressed condition.

The truth is that there are not enough buyers of homes in that price range to absorb the inventory for several years.  As we continue to dump distressed properties on the market, the values will continue to plummet.

But here's a simple solution.  If you LIKE the idea, TELL YOUR CONGRESSPERSON ... FAST.  Send it to your local Realtor Board with your letter of support and request they lobby for the idea with your state Realtor association and NAR.  Send it to ALL OF YOUR DATABASE and ask them to send it to THEIR CONGRESSPERSON.

You want to get rid of the glut of foreclosure properties FAST and fix the real estate problem?  It's simple. No government bailout, no throwing money at the problem.  Simply eliminate the capital gains tax on investment properties purchased during the next three years.  Can you imagine how much money would flow out of wealthy people's bank accounts to buy up the excessive supply of foreclosure homes??  They would be calling their real estate agents, saying, "I've only got $700,000 left in my investments after AIG destroyed me.  I want to buy ten $45,000 dumps, fix them up, and sell them (or rent them) and when I sell (in 90 days or 10 years), I get to keep every nickel of profit.

Can you imagine how fast and furious real estate investors would rush into the market to take advantage of such a program?

And most of them will hire the work done.  Plumbers go back to work, tile and carpet installers' phones ring again, new windows are needed, roofers have jobs, and so on and so on ...

Suddenly (within 12 months), the glut of homes forcing real estate values down is removed from the market by the private sector, not by the government, and the homes left on the market are those in marketable condition, not distressed condition.

 While I'm at it, here is another crazy idea:

Reinstate consumers' ability to write off interest paid on credit cards, auto loans and second homes.  Those interest write-offs were eliminated during an inflationary spiral to curb excessive spending.  Today, we are in a recessionary (depressionary?) plunge now, and reinstating those tax credits might free up a bit of money for spending.

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Rainer
31,144
Loren Johnson
White Bear Lake, MN
CMPS

It sounds too easy....so of course, nothing will be done about it! I like the idea, I hope it picks up some steam!!

Feb 04, 2009 06:47 AM #1
Rainer
49,477
Don Phelan
Grand Rapids, MI
Five Star Real Estate

Loren,

I agree that it sounds so simple that it won't work, but every real estate expert and economist I've spoken with agrees it will.  I need you to pick up the ball and send it on.  Only in that way will it ever pick up steam.

I've come to realize our politicians are not smart enough to get us out of this mess; we are going to need to tell them (In many loud voices) what it will takes to fix our economy. 

Send it on.

Feb 04, 2009 06:55 AM #2
Rainmaker
21,951
Joseph Mazzei
Wholesale Mortgage Services - Tampa, FL

i admire your enthusiasm, but that idea is not all its cracked up to be. you gotta have capital gains before you actually have to pay taxes on them. what you may not be considering is that a savvy real estate investor already pays little or no capital gains tax, by using things such as depreciation and other expenses to reduce their tax obligation. i own rental property and pay next to no capital gains.

in addition, real estate investing is considered to be an active investment, its not just something you can write a check for, sit back, and then collect your profits somewhere down the road. for this reason i do not think people who have $700k left  in their investment accounts will rush to buy real estate. investors are still in capital preservation mode, and until confidence is restored, a lot of investors are going to just sit on their money. especially when it comes to buying houses.

that's not to say that a lot of existing real estate investors wouldn't be happy with that situation, but i don't think it would be enough. if u want to soak up all the existing inventory, you gotta get buyers back into the market. the way you do that is to get people working again! in addition, fha & needs to allow seller funded daps again, but with more restrictions; and fannie mae needs to bring back 100% financing. that is one thing that would go a long way especially after many peoples savings accounts have been decimated.

i agree that politicians dont know squat about our business, and they definitely dont know how to fix it. they need to enlist the help of some brilliant minds currently in the industry, as well as let the remaining professionals (people like you and i) help clean up this mess by making it easier for us to do our job, not harder.

Feb 04, 2009 07:19 AM #3
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Rainer
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Don Phelan

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